Stock Analysis, IPO, Mutual Funds, Bonds & More

It is good to see Jio not going for deep discounts now: Nitin Soni, Fitch Ratings

Jio EBITDA of Rs 4,000 crore plus is way ahead of what Voda-Idea and even Bharti reported last quarter.

ET Now|
Aug 12, 2019, 03.19 PM IST
Nitin Soni-Fitch Ratings-1200
At Rs 700, the lowest plan is in the vicinity of the current ARPUs from the Bharti home subscribers. This will also help Bharti expand its home subscriber base as well since the entire market segment will expand, says Nitin Soni, Director, Corporated, Fitch Ratings. Edited excerpts from ETNOW.

A lot was spoken about Jio extension into various businesses and business model. What were your key takeaways?
It was quite an impressive presentation of the capabilities and content being offered to FTTH (fibre-to-the-home). They are going to launch FTTH on 5th September, costing between Rs 700 and Rs 10,000 and with the minimum speed of 100 mbps all the way to 1 Gbps. It sounds like a very compelling offering with abilities of conference calling, first-day-first-show movies which is something which the Indian consumers have not really seen and which is not being offered by the other telecos.

Remember, Bharti has only about 2.4 million home subscribers even after so many years of operation. This is going to expand the whole home broadband market in India because some of these applications on content will be very new and it would be quite attractive for most of the Indian consumers and that comes at a price point which is quite affordable.

It is good to see that they have not gone for a deep discount from the current ARPU of Bharti. So, at Rs 700, the lowest plan is in the vicinity of the current ARPUs from the Bharti home subscribers. In my view, this will also help Bharti to expand its home subscriber base as well because this whole market segment will expand, given we have at least 250 million homes in India with a population of 1.2-1.3 billion. The penetration of fibre broadband is still very low. Jio’s market execution has been phenomenally well wherein they have already achieved 340 million subscribers. They are the market leader by subscribers now.

Even in term of revenue market share, they are ahead of Voda-Idea and Bharti. Their quarterly EBITDA of Rs 4,000 crore plus is way ahead of what Voda-Idea and even Bharti reported last quarter. ARPUs have been flat. We are of the opinion that ARPU will gradually go up and as more rural subscribers move towards data consumption. There are only 150 to 200 million rural subscribers as of now. Adding ten million subscribers per month says their execution is far better than the other telcos.

It may be too early to arrive upon the numbers but the two Jio related services which have been announced; a)New Commerce, to be launched from September 5, whereby all the merchants will be brought on to the Jio powered point of sale network, and b)FTTH. What is the potential of these two services to add to their cash flows over the say 12 to 18 months?
It is too early to say what will be the revenue and EBITDA in this segment but clearly this is a market segment which is going to explode in my view because if you compare India with say China or some of the more developed countries, even Singapore, Hong Kong, the fibre broadband is something which is indispensable for users outside India because that enables wifi, smart TVs and other applications. More and more people are using the internet of things (IOT), smart lights and home automation system.

This is something which most of the Indian consumers have not really seen so far because the connectivity has not been so good or the broadband speed is not that great and/or just the market execution of the existing telcos has not been that strong. That is why Bharti has only 2.4 million consumers with at least 250 million homes.

So it would be fair to say that given they already have what 10 to 15 million registrations on their segment and half a million are already using their home broadband services for free, the ramp up would be very fast and they would easily get maybe another five to ten million subscribers in the next two to three years.

Even on a conservative basis and that $10 dollar ARPU (Rs 700), this is going to add a new leg of revenue stream and then they are going to cross sell this fibre broadband for the other services -- the conference calling, the overseas calling to the US, Canada and the first-day-first-shows and premium movies and all those. It is a starting point when you get into consumer homes and then you have the ability to cross-sell the other services. Remember the stickiness of this kind of services is very high. It is not like mobile then you just throw out your chip and buy Bharti’s sim. The stickiness of these kind of fibre broadband play services are very high.

Also Read

Fitch Ratings’ Nitin Soni on telecom sector in India

Fitch Ratings raises Reliance’s outlook to positive

Vodafone, Bharti Airtel to be affected as SC rejects AGR review plea: Fitch Ratings

Bharti Airtel has shown commitment to retain investment grade rating: Nitin Soni, Fitch Ratings

Tariff hike not sufficient for Voda Idea, credit positive for Bharti: Nitin Soni, Fitch Ratings

Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links

Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service