Telecom Services Comprise 94% Of Reliance Jio’s Earnings, Will This Change In 2021?

Mukesh Ambani’s Reliance Industries Limited (RIL) has been disclosing financials of Jio Platforms Limited (JPL) since past two quarters now. So far, the share of RIL’s telecom arm Reliance Jio Infocomm Limited (RJIL) has comprised a bulk of JPL’s earnings at almost 94%. During the Q3 FY21 earnings call, the JPL management however presented an elaborate plan for digital offerings meant to increasingly add to JPL’s growth. Some of these offerings are expected to roll out within CY21 itself across IoT, Security and SMB focused solutions.  

This is the second consecutive quarter that the company has disclosed JPL financials. In Q3, JPL reported a net profit of INR 3,489 Cr representing a 15% hike compared to INR 3,020 Cr reported in the September quarter. Jio Platforms consolidated revenue from operations, including access revenues, of INR 19,475 Cr in Q3 representing a 5.3% on the quarter increase, with an EBITDA margin of 43.6%. The company also achieved an annualised operating revenue run-rate of $10 Bn. 

Incorporated in December 2019, Jio Platforms Limited is an umbrella platform for all the Reliance-owned digital businesses including Reliance Jio Infocomm, MyJio, JioMeet, JioTV, JioCinema, JioNews and JioSaavn. JioMeet, crossed 15 Mn users during the quarter.

During the December quarter, Jio Platforms raised funds to the extent of Rs 33,737 crore by issuing equity shares to Google International LLC. With this, the entire amount of INR 152,056 Cr has been received by Jio Platforms.

The company generated 94.5% of its revenue from telecom services driven by higher average revenue per user (ARPU) which rose to INR 151 from INR 145 in the previous quarter. The telco ended the quarter with 410.8 Mn users, up 25 Mn users over the previous quarter. 

Monetisation Plans Across Jio Platforms

Kiran Thomas, President, Reliance Jio Infocomm Limited said that JPL is building on two pillars of growth- digital connectivity infrastructure and digital solutions. “The company is building device solutions apart from software solutions, many of which are already in the internal beta testing stage,” said Thomas. Beyond indigenious 5G solutions, that the company announced during its annual general meeting in 2020, the company is building on a strategy to offer connected IoT devices (B2B and B2C), home entertainment solutions (already in the market) and small businesses focused solutions (in partnership with Microsoft). 

“The second pillar for our growth is what we call digital solutions, which are built on top of the digital connectivity infrastructure. There, we talk about device solutions, as well as software solutions, which are appropriate both for individuals, small businesses, enterprises. And obviously, covering very very crucial areas like education and healthcare, all of those solutions are nearing launch,” said Thomas.

The management informed that many of the company’s 5G solutions across small cells, Massive MIMO and indoor small cells are already undergoing field trials.  Among device offerings, the management focused on two main areas including the television set-top box which offers content solutions that the company aims to monetise, and IoT solutions for home and enterprises.

The set-top box will be used as a monetisation channel through advertisements and other connected monetisation options across homes that opt for the Jio Fiber (fibre to the home or FTTH) service. This is the first time that the management has chalked out its advertising opportunities through its range of content service offerings.

Across IoT, the company is planning to strengthen its presence in security offerings through B2C monitoring and automation services. Over the past year, Indian telcos have been strengthening their security play with a number of different offerings. Although, solutions introduced by Vi and Bharti Airtel have focussed more on enterprise software and cloud security unlike Jio’s focus on surveillance. Remember, in 2018, global tech giant Amazon had acquired a smart video doorbell startup Ring? Jio Platforms has similar solutions up its sleeve now with a few major rollouts to real estate developers expected within 2021 itself.

Finally, the company also presented a more detailed plan on its SMB offerings where it plans to target small businesses with connectivity and go-to market solutions. Jio (with its Microsoft partnership) competes with Airtel in this space which offers similar solutions via Google G-Suite and AWS partnerships. SMBs are a huge market for the telecom operators where they are targeting to offer an intermediate solution package between enterprise and home solutions for businesses seeking internet and commerce solutions to grow an online presence. 

Jio Platforms raised over INR 1.52 Lakh Cr from 13 global investors, including Facebook and Google for a cumulative equity stake of 32.96% in 2020.  While the company often hinted at its digital and connected device plans prior to these investments, it is only in recent quarters that it has started breaking down the exact nature of solutions and monetisation opportunities. Even as the telecom arm’s growth rate normalises, the company has kept investor curiosity high with snippets of its digital platform strategy. But will they be able to show revenue contribution from these solutions soon enough? Only time will tell.