Reliance Jio, Mukesh Ambani’s Indian mobile operator, is battling declining share of active customers, even as the company touts its breakneck growth to attract billions of dollars from top foreign investors.
Four-year-old Jio has used rock-bottom prices to become India’s largest operator, with a customer base that rose to 397 million in June, the most recent month for which data is available. This huge footprint helped Ambani, the richest man in Asia, this year sell $ 20 billion worth of Jio stakes to 13 global investors, including Facebook and Google.
However, Jio has faced a drop in the share of active users in its subscriber base even as its total number of subscribers has continued to grow. Jio’s share of active users fell in June to about a three-year low of 78 percent from 84 percent a year earlier, according to data from the Telecommunications Regulatory Authority of India.
TRAI defines active users as the maximum number of subscribers connected to the network at any given time during that month. That meant 87 million Jio users were inactive at the time of TRAI’s measurements.
In contrast, the share of active users at its two competitors Vodafone Idea and Airtel rose to 90 percent and 98 percent over a similar period, as the pair consciously removed subscribers who don’t regularly complete their plans. By number of active subscribers, Airtel was on par with Jio at 310 million in June.
TRAI reports the monthly subscriber bases of the three private telecom operators in India, breaking down the total number of registered SIM cards versus those connected to the network. Companies then take varied approaches to how they present those figures to their investors each quarter, although there is no indication that any of the companies are misreporting.
Airtel and Vodafone Idea use more limited definitions of active revenue-generating customers, helping to increase your revenue per user. However, Jio offers its investors a more comprehensive figure based on the total it reports to TRAI.
But Jio’s declining share of active users has drawn scrutiny from some analysts and industry observers, who question how so many seemingly off-grid customers can contribute to revenue. “The great magnitude of this absolute gap [of 87m] it’s amazing, “analysts at Kotak Institutional Equities wrote this month, calling it a” conundrum. “
“We cannot understand why [Reliance] Jio’s subscriber base would exhibit very different behavior ”compared to Airtel, Kotak said.
In a statement responding to a list of questions, Jio’s parent company Reliance Industries said that the Financial Times inquiries showed “limited understanding of the concepts or malicious intent to create controversy.”
“There are several reasons why a client, especially data clients, may not be active on the network at any given time,” he continued. Reliance added that it follows all regulatory guidelines. For that reason, “Jio reports a constant number of customers in all reporting formats unlike some of the other operators.”
Among the possible explanations for the large gap in the Jio base is that customers who got a cheap Jio SIM card can use it sparingly as a backup or for data-only dongles.
The coronavirus pandemic could have forced more casual customers to cut back on its use, such as migrant workers who have returned to their home villages and no longer need, or cannot pay, to renew their plans as often.
But the trend runs the risk of complicating Ambani’s vision of transforming the operator into India’s first local tech giant, using its 4G customer base of nearly 400 million as a springboard to sell everything from e-commerce to fintech. “We are well equipped to address any potential challenges in achieving our Digital Society vision,” said Reliance.
The mogul aims to reach 500 million customers in three years. But, having enjoyed great growth, some analysts say Jio must show that it can drive engagement with its less-active customers.
Jio “will continue to follow this discount strategy,” said Vivekanand Subbaraman, an analyst at brokerage Ambit Capital. By offering enough new services and benefits at affordable prices, “they believe that those inactive customers will also become active at some point.”
