A lesson in business disruption: Reliance Jio turns profitable within 15 months of launch

By Anshia Dutta 

Jio, the telecom arm of Reliance Industries Limited has turned profitable in the first 15 months since its inception. The December 2017 quarter result of the company has reported a net profit of ? 504 crores.

Jio’s entry into the telecom industry

Jio’s services were commercially launched on 5 September 2016. It acquired 16 million subscribers within the first month of its launch. Since then, it has grown immensely—both in terms of subscribers and in terms of expanding its business by launching new services. Jio had around 130 million subscribers in October 2017 and 160.1 million subscribers as of December 2017. Since its entry into the telecom sector, the market was sent into a frenzy. It started off a cut-throat rat race by reducing the prices amongst the leading companies which resulted in a reduction in the profit margins and ended with the consolidation of Idea Cellular Limited and Vodafone India Limited.

In the past 15 months, Jio has launched a number of products and services. It started with Jionet Wi-Fi when prior to its pan-launch of 4G services in India, Jio provided free Wi-Fi hotspot services in many cities of the country. On 25 January 2016, the company launched its LYF Smartphone series. Later, in May 2016, Jio launched multimedia apps on Google Play – MyJio, JioCinemas, JioMusic, JioDrive, JioSecurity, JioSwitch and others – which could be downloaded by any Jio user. Jio had also launched JioFi which is a WiFi router. The company also introduced its first-ever affordable 4G feature phone which goes by the name JioPhone.

Jio’s first-ever quarterly profit

Reliance Jio Infocomm reported on Friday, 19 January 2018, that it earned a net profit of ? 504 crores in the quarter ending December 2017 whereas it had incurred a loss of ? 271 crores in the previous quarter ending September 2017. Its revenue from operations stood at  ? 6879 crores, up by 11.9% growth from the previous quarter. Its average revenue per user (ARPU) was reported to be ? 154 and its earnings before interest, tax, depreciation, and amortization stood at ?2628 crores and its operating profit margin ascended by 4.7% from the previous quarter. Its total wireless data traffic during the October-December period was a whopping 431 crore GB, that is, 9.6 GB per subscriber per month and the total voice traffic during the period was 31,113 crore minutes. Strong subscriber additions and cost efficiencies, including sharply lower payments on account of interconnection usage charges, are the reasons of Jio earning its first quarterly profits.

Mukesh Ambani, Chairman and Managing Director of Reliance Industries Limited said, “Jio’s strong financial result reflects the fundamental strength of the business, significant efficiencies, and right strategic initiatives. Jio has demonstrated that it can sustain its strong financial performance.” He also added, “The company is committed to pushing newer innovative products, which would radically transform customer lives and generate huge societal value.”

Anshuman Thakur, head of strategy and planning at Jio said, “We are creating enormous capacity. Costs have been incurred, now it will be on more revenue generated. That scale benefit is contributing to improving the profits number and this revenue will go up, not costs,” thus indicating the possibility of a higher profit in the next quarter.

It seems like Jio is the next big success story. Even after 15 months, its user base continues to grow with its new tariff plans across different ranges of prices and cash back offers. It certainly is a hit amongst the masses. However, with the Idea and Vodafone merger ahead of it, are the tables going to turn?

Featured Image Source: Wikimedia Commons