Reliance Jio plans to overtake Airtel, hit 50% revenue market share in 4 years

Reliance Industries Ltd (RIL) is targeting a revenue market share of 50% for Reliance Jio Infocomm Ltd by 2021, the company said in the first guidance it has provided analysts on its telecom business.

RIL also said in a presentation to analysts on Thursday that Reliance Jio’s Ebitda margin will exceed 50% by that year. Ebitda is short for earnings before interest, tax, depreciation and amortisation—an indicator of operating profitability.

The target set in a conference call by RIL for 2021 exceeds the current revenue market share of Bharti Airtel Ltd, India’s largest telecom company, of 33%.

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RIL’s forecasts are based on its estimates that revenue of India’s telecom industry will increase 50% from current levels to Rs3 trillion by 2021, largely driven by demand for data, while voice revenue will fall from Rs1.5 trillion to Rs0.5 trillion.

RIL also believes as many as 400 million subscribers can afford to spend Rs500 and more on digital services, leading to increased average revenue per user.

“Shift of Rs1 lakh crore from voice will take data revenue to Rs1.3 lakh crore,” RIL said in a presentation, which has been reviewed by Mint.

The increased demand for data will be driven by mobile-phone screen size, image resolution, data speeds and time spent. RIL expects average consumption of 10 GB per month across all telecom zones. It claimed that Reliance Jio caters to 85% of mobile data traffic in India currently and can support more than 60% of the data market by 2020-21.

“Industry growth was low in last 5 years, next 5 years to see rapid growth with data explosion,” it said.

Since its launch in September, Reliance Jio claims to have signed up 100 million subscribers. Its entry, with zero tariffs until 31 March, has unleashed a price war in the telecom industry, with incumbents cutting rates to retain customers.

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Since Reliance Jio’s launch, the telecom industry has lost about 20% of its revenue, India Ratings and Research said, revising its sectoral outlook for 2017-18 to “negative”. Shares of RIL rose 2% to Rs1,258.45 on Friday while the benchmark Sensex edged down 0.03% to 28,832.45 points. RIL’s forecasts failed to impress some analysts.

Credit Suisse in a note to investors said that its analysts find “targets for both industry revenues and Jio market share aggressive”, especially as this level of ARPU expansion has never been seen globally; intensifying competition amid Jio’s bid to gain share will keep the ARPUs depressed, it said. ARPU is short for average revenue per user.

In addition to an update about their plans and business outlook, the Reliance Jio management also provided insights into future product launches, such as Jio Car Connect, Credit Suisse said. “Apart from mobile data, we see fibre to the home (FTTH) as a key revenue driver for Jio. We expect management focus to shift to FTTH post successful commercial roll out of the mobile network,” it said.


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