金沙9159游艺场Indian Telecoms:Jio maintains momentum on
Bharti closes the product gap but at a cost.
金沙9159游艺场， While Jio has maintained the momentum on subscriber additions, Bharti hasbeen inching closer on data and voice usage metrics. Overall, Jio reportedrevenue of Rs69bn and EBITDA margin of 38.2% compared to Rs107.5bn and32.6% margin for Bharti. There are reporting differences which understate Jio’srevenues and overstate margin relative to Bharti. Jio’s digital strategy is bestreflected in its SG&A costs which remain demonstrably lower than Bharti. Thekey concern is Jio pricing stance which aims to deliver more ‘value’ relative toincumbents – this has translated to price cuts after the incumbents matchedJio’s offers.
Key metrics: Jio vs Bharti.
Subscribers: Jio (160mn), Bharti (290m, of which 62m broadband subs). Netadds: Jio +21.5mn, Bharti (+6.9mn broadband net adds). ARPU: Jio Rs154(-1.5% QoQ) Bharti (Rs123, -15.2% QoQ). Data usage per sub: Jio (9.6GB),Bharti 5.3GB (+31% QoQ). Bharti’s overall network throughput grew 41% QoQto 1,106mn GB compared to Jio 14% growth to 4,310mn GB.
Jio network and SG&A costs are significantly lower compared to Bharti.
Jio’s network opex (Rs17.3bn) is half of Bharti (36.4bn) though the mobile sitecount is likely to be closer (120K est for Jio vs 160K for Bharti). However, Jio’ssites are largely owned compared to Bharti (rented), thus impacting networkcosts. Jio’s SG&A costs (Rs4.7bn) are dramatically lower compared to Bharti(Rs23bn) – this is likely due to Jio’s successful usage of its app to deliver all itsdiscount offers and plan recharges. We believe this will remain a major sourceof competitive advantage for Jio in the medium term (table inside with details).
Jio pricing stance remains a risk to sector revenues.
After two rounds of price increases since Apr 2017, when the service wentfrom ‘free-to-pay’, Jio recently changed its offers by increasing the daily datalimits or reducing its tariffs by around 10-20% (table inside). The companyindicated that it intends to maintain a ‘value gap’ with the incumbents – a corepromise of its offering at launch. Jio’s pricing stance remains a risk to thesector revenue table in the mid-term which has fallen c.10% since its launch.
D&A and finance costs are not comparable due to difference in accountingpolicies.
Jio’s D&A costs (Rs12bn) and finance costs (Rs6.6bn) are significantly lowerthan Bharti (Rs41bn and Rs15bn). The former is using a ‘unit of production’method for its wireless network costs (spectrum & capex) in which the costswill scale up with higher utilisation of network capacity. Bharti uses the moreprevalent a straight-line method. We note that Jio’s estimated capitalemployed for its wireless business at $27bn is almost 50% higher than Bharti($18bn). Jio’s total capital employed stands at around $35bn.
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