Jio surges forward with subs and profits

Reliance Jio has unveiled its latest quarterly figures and, surprise surprise, subs are once again on the up as well as profits.

Monthly ARPU might have be on the decline, down to $1.77, a trend which is not showing signs of slowing, but scale seems to be the answer for Jio. The firm now has a subscriber base of 331 million, adding 24.5 million over the last three months and 116 million during the last year.

“Growth in Jio mobility services has continued to surpass all expectations,” said Mukesh Ambani, MD of Reliance Industries, Jio’s parent company.

“In less than two years of commercial operations, Jio network carried almost 11 Exabytes of data traffic during the recently concluded fiscal quarter. Jio management is focused on giving unmatched digital experience at most affordable price to every citizen of the country, and accordingly expanding the network capacity and coverage to keep pace with demand.”

The progress which has been made by the firm over the course of the last two years is remarkable and perhaps demonstrates how under-developed the Indian market actually was. Although India has been seen as a growth economy, part of the now old-fashioned BRICs group, it wasn’t until Jio shook up the market the digital revolution took hold.

Average consumption of data is now up to 11.4 GB a month, with Jio suggesting customers used 10 exabytes over its network during the quarter. The Indian consumer certainly has an appetite for data and they don’t seem to be satisfied whatsoever.

Looking at the financials, these are also very promising. Early criticism of Jio was that it was negatively impacting competition in the market as there was little profit being made by the firm. This is generally seen as a negative, as running loss leaders to kill off competition very rarely works for the greater good in the long-term, though the numbers speak for themselves.

Quarterly revenues increased 44% year-on-year, while the firm collected profits of $119 million, a 45% year-on-year boost. These numbers are attractive for the moment, but profitability currently looks to be reliant on scale and subscriber growth. Sooner or later, this growth will slow, and the team will have to look at the worrying rate at which ARPU is declining.

Period Q1 2019 Q3 2018 Q1 2018
ARPU (Indian Rupee) 122 130 154

Indian companies to be punished for Huawei business

India is the latest country to be dragged into the US/China conflict as the threat of punishment is directed towards any companies who work with Huawei.

According to the Economic Times, any company found to be supplying components or products to Huawei, or any affiliated company on the US Entity List, could face regulatory penalties. Although the White House has focused on crippling Huawei through placing limitations on US companies, it seems the US Government feels it needs to spread its wings further.

“Any Indian company which will act as a supplier of US-origin equipment, software, technology to Huawei and its affiliates in entity list could be subject to penal action/sanction under US regulations,” said Telecoms and IT Minister Ravi Shankar Prasad in Parliament this week.

Although Huawei’s entry onto the Entity List, a list of companies which US firms are banned from working with, has had a notable impact on the Chinese firm’s business, it seems the consequences have not gone far enough. Huawei has suggested smartphone shipments will certainly take a hit, but the company is still functional, seemingly much to the distaste of US officials.

Last year, the US dropped an economic dirty-bomb on ZTE and it almost destroyed the firm. ZTE’s supply chain was unhealthily concentrated in the US leading to the distress, though as Huawei’s supply chain is much more diversified, the same action has not brought the same result.

Perhaps this is another step to add further distress to Huawei. If the US Government places restrictions on the companies who supply Huawei, irrelevant to their nationality, it might have a better chance of hurting the Chinese vendor.

That said, the impact on Huawei might just be a pleasant by-product of a dispute between the US and India. Like China, Mexico and Canada, India has got its own tensions with the US this time concerning data localisation.

Last month, rumours emerged that India would be the latest target of the US. India currently has laws in place which force foreign companies to store data on Indian consumers and businesses within the borders. There are other countries who have similar laws, but the US does seem to have some leverage over India.

H-1B work visas allow an individual to enter the US to temporarily work at an employer in a specialty occupation. Although there are no official quotas, it is believed Indian citizens account for as much as 70% of the H-1B work visas which are handed out each year. If localisation rules are not relaxed, the US has threatened to curb the flow of visas into India.

What will interesting to see is whether this is a strategy which is rolled out globally for the US Government. If it holds all of Huawei’s suppliers who use US components, products or IP in their products to account, there will be a varied list. This might be a strategy to further cause distress to Huawei, though we suspect it could also be used as a bargaining chip in the larger trade discussions.

US rumoured to begin posturing at India

The Trump administration is certainly an ‘enthusiastic’ one, and now it appears it might be turning its attention to India.

According to Reuters, the US is set to start beating its chest in front of the Indian Government, suggesting it will limit H-1B work visas for nations who force foreign firms to store data locally. US Secretary of State Mike Pompeo is currently readying his forces for an Indian excursion, and it would appear he is not in a friendly mood.

The H-1B work visas are popular with many US businesses and individuals around the world. The visa allows an individual to enter the US to temporarily work at an employer in a specialty occupation. Considering the foundations of Silicon Valley were built on its ability to attract the best talent from around the world, this has been a very beneficial programme for the US economy and those specialised workers who want to maximise their earnings.

Although there are no official quotas, it is believed that Indian citizens account for 70% of the H-1B visas which are issued each year. One outcome which is being suggested is that the country and its citizens would be limited to 15% of the annual total.

However, should the rumours prove to be true, it could widen an already strained relationship between the US and India. The US might be the most powerful and influential nation worldwide, but it is proving to be more of a bully than an ally at the moment.

Interestingly enough, this move could also put the US at odds with numerous other nations; India is not the only one which places data localisation requirements on foreign countries.

Russia and China are two countries which have very strict data localisation laws, though it will surprise few that the US does not have an issue in upsetting these governments. The European Union is another however. There are currently laws in place in Europe which make it difficult to transfer large volumes of data outside of the bloc, effectively acting as localisation requirements.

One of the best examples of how difficult the European laws can be to navigate is a battle between the US Government and Microsoft which ended last year. In this saga, the Department of Justice wanted access to emails stored on one of Microsoft’s Irish servers. Due to localisation complications, Microsoft argued the US had no jurisdiction and should not be granted access to the content. This battle continued for five years, with the passing of the CLOUD Act effectively ending the debate. It is still controversial, but this chapter has been closed.

Protection of a nations citizens and jurisdiction are two of the reasons sovereign nations are keen to implement data localisation laws, as well as the fact it provides a handy boost to the local economies. We suspect there will be objections if the US attempts to bully its way to eradicating these requirements.

Should the reports be true, another data privacy and protection debate could be on the horizon.

Vodafone Idea has had enough of toe-to-toe Jio battle

Vodafone Idea has contacted subscribers to confirm the end of its ultra-low-priced data tariff as it shifts towards ARPU over scale.

According to The Economic Times, Vodafone Idea is following in the footsteps of Bharti Airtel to end its lower cost data tariffs. These might be attractive to Indian consumers and do encourage the overall subscription numbers, but the dent which has been put in ARPU figures seems to be too much to stomach anymore.

The SMS states:

“Dear Customer, your current Idea post-paid plan is no longer valid from 10-July-2019.You will be upgraded to Nirvana 399 with benefits of unlimited voice calls, 40 GB high speed data and 100 L/N SMS.”

Although the telco is asking subscribers to effectively double their monthly bill, the new data plan does also include year-long subscriptions to Amazon Prime, Prime Video and Prime Music, as well as other bundled TV services.

For Vodafone Idea, this is perhaps a move which has been on the horizon for some time.

When Jio entered the market, it offered a service which drastically undercut anything from the incumbent players. This loss-leader position threw the market into chaos, with profits being slashed everywhere and telcos disappearing from the landscape. The remaining players had to create tariffs which were competitive, such was the queue of consumers waiting to switch to Jio, but they would also have to stomach significant blows on the financial spreadsheets.

What this move does suggest is that Vodafone Idea is willing to sacrifice subscriber scale, focusing on higher-value services and customers. It will see market share drop, but if there are greater profits on the horizon, investors might be happy with the outcome.

Jio is unlikely to follow suit, why would it if it is profitable at the same time as cheap, but this doesn’t mean Vodafone Idea is in trouble; there will be a market for higher value services in India and this is just a different way of doing business.

What this does suggest is that Vodafone Idea cannot tolerate the toe-to-toe battle with Jio. It seems it cannot be beaten at its own game, so perhaps it is a better idea for Vodafone Idea to carve its own niche in the Indian telco environment.

South Korea has the best mobile experience except for latency – Opensignal

Network measurement outfit Opensignal has published its latest ‘State of the mobile network experience’ report and Korea is mostly on top.

South Korea is well ahead of any other country in the world when it comes to download experience, with average speeds topping 50 Mbps, which most fixed broadband users can only dream about. Only Norway comes close, with even third-placed Canada a clear 10 Mbps behind. At the other end of the scale we inevitably have developing countries, but it’s surprising to see India still lagging at 6.8 Mbps average despite all the investment from Jio.

Download Speed Experience_Opensignal State of Mobile Network Experience 2019

It looks like all that Jio cash has been focused on coverage, with India doing a lot better in terms of 4G availability. Your average Indian punter get access to 4G 90% of the time, we’re told, but that’s still not good enough to challenge South Korea, which once more tops the list with 97.5% availability. Iraq, Algeria, Nepal and Uzbekistan once more prop up the table, as they did with download experience.

4G Availability_Opensignal State of Mobile Network Experience 2019

Intriguingly South Korea is nowhere near as good when it comes to latency experience, for some reason and is also dropping the ball in terms of video experience. We thought the two were related until we saw that Norway is top of the video experience pile in spite of being even worse than Korea when comes to latency, so maybe not. Europe is generally strong when it comes to latency and video experience.

Comparison of leading countries in Opensignal key metrics_Opensignal State of Mobile Network Experience 2019

RCom boss opts to pay Ericsson bill rather than go to prison

Indian telco Reliance Communications owed kit vendor Ericsson millions of dollars but didn’t feel like paying up. The threat of jail time seems to have changed its mind.

At the start of the year Ericsson requested RCom Chairman Anil Ambani be locked up unless his company settles its debts but a couple of months later it still hadn’t coughed up. The Indian court gave him until 19 March to find the cash and now, with one day to spare, it’s being widely reported that Ambani managed to scrape together enough shrapnel to remain a free man.

The precise amount handed over was 462 crore rupees, which we’re going to take Reuters’ word for that being equivalent to around $67 million because we can’t get our head around India’s number system. That still seems to leave $10 million or so outstanding, but is presumably enough to placate the Indian courts for now.

Had he not paid Ericsson Ambani would have been held in contempt of court because it had been judged that he had the cash handy, but just felt like holding onto it. We’ve all felt that from time to time and, if we’re honest, sometimes it’s only the law that keeps us honest. RCom’s shares were down 9% at time of writing and are trading at around the quarter of their price a year ago.

Vodafone CEO bemoans Jio effect on India

The Indian consumer might be surging into the digital economy at an unprecedented speed, but the telcos are certainly not reaping the rewards according to Vodafone CEO Nick Read.

Speaking at Mobile World Congress in Barcelona, Read pointed towards consumers which are consuming more data every single day (12 GB a month on average), as well as unsustainable business models and regulations which favour no-one except the disruptive influence of Jio. It isn’t necessarily a picture which creates an encouraging view of the market.

“We only ask for a level playing field,” said Read, bemoaning regulatory and competition rulings made in the country.

It seems Reid believes there has been an institutional preference towards the newest entrant into the Indian telco regime. This is also a company which is forcing the market to create artificially low tariffs, an unsustainable position for the market to maintain. What impact this has on the long-term prospects of India’s digital dream remain to be seen.

While it is hardly unusual for the CEO of a losing telco to moan about unfair market conditions, there have been some credible points made. Jio did certainly disrupt the market, helping the country move into the digital era, but there was certainly consequence. The aggressively low tariffs saw numerous telcos exit the space, either closing-down operations, merging with a rival or declaring bankruptcy.

Vodafone was one of those victims, currently in the process of merging its operations with long-term rival Idea Cellular. Reid highlighted he has been over to India to review the plans recently, and the team has managed to reduce the integration process from four years to two, but it is still losing money. That said, it is not alone.

The issue which remains here is what happens if this trend of Jio destruction is allowed to continue. How many more telcos will disappear from the landscape (there are only effectively four left, including government owned BSNL) before the government steps in to do something. The current position is not exactly ideal.

As it stands, India currently have four major telcos to provide connectivity services for roughly 1.3 billion people. Europe has roughly 160 telcos for a population of 500 million. Although many would argue there needs to be consolidation in the European space, the shortage of options in India is not exactly ideal. The risk of regionalised monopolies is certainly present.

Of course, the newly merged Vodafone Idea business is not lying down while Jio runs riot throughout India, Reid highlighted a Rights Issue is currently underway with the business hoping to raise $3.5 billion. Not only will this help the businesses merge and update infrastructure, it would be fair to assume some pretty aggressive counter-strikes against Jio.

India is one of the most interesting markets worldwide right now, but there is certainly a risk of the landscape devolving into chaos. Whether the Indian government is sympathetic to Reid’s plight remains to be seen, though current trends should not be allowed to continue.

China plummeting and India soaring but Apple just can’t get a break

IDC had a stab at smartphone shipments in two of the worlds most lucrative markets, and it does not make pleasant reading for Apple.

As the Apple management team has now decided against dishing out the specifics on iPhone shipments in the quarterly statements, analysts are the closest we’re going to get for sales figures. Here, IDC is suggesting a sluggish market overall in China, with iPhone sales dropping considerably, while the Indian market is booming, but Apple can’t claim a slice of the action.

Starting with the Indian market, IDC estimates 142.3 million units were shipped across 2018, demonstrating a 14.5% year-on-year increase, though the final quarter saw a 15.1% sequential decline. This might not look as bad as it originally sounds however, as Q4 actually increased year-on-year 19.5%, suggesting the third quarter was just exceptionally positive.

“Amongst the big highlights of 2018 were the online-focused brands that drove the share of the online channel to an all-time high of 38.4% in 2018 and a whopping 42.2% in 2018Q4,” said Upasana Joshi of IDC. “This was primarily driven by several rounds of discounts by e-tailers driving affordability through various financing options, cashback offers and buyback schemes.”

The Jio effect is clearly sustainable across the country as Indian consumers appetite for the digital economy continues to grow. With the disruptive telco promising further expansion, greater digital inclusivity and additional services over the coming months, more consumers might be encouraged to upgrade to more premium devices. As Joshi notes, the premium end of the market was the fastest growing price segment, demonstrating 43.9% year-on-year growth.

What will be worrying for the iLeader is the inability to get a foothold in the market and capture the attention of Indian consumers. India is traditionally a market driven by low-end devices, however the encouraging growth of handsets priced north of $500 should offer some traction for Apple.

Xiaomi led the market, having recently overtaken Samsung, with 28.9% of total shipments, a healthy 58.6% increase from 2017. Samsung collected 24.7% of Indian devices sales, while Vivo had 10%, Oppo 7.2% and Transsion with 4.5% completes the top five vendors. The remaining 27% of shipments were shared through multiple vendors, Apple included, though the bundled peloton chasing the leading five saw total sales drop by 10.7% year-on-year.

With sales across the world seemingly declining for Apple, the booming Indian market is one it can ill-afford to miss out on. Last year, it announced it was moving manufacturing into the country, with partner Foxconn aiming to be up and running in early 2019, while there are also plans to expand the retail footprint. The team reportedly plan to open three massive stores in both Delhi and Mumbai, owing to the success of retail operations elsewhere around the world.

While India might be a headache due to the iLife indifference of the locals, China is turning into a full-blow migraine for completely separate reasons.

IDC estimate Apple’s smartphone shipments have declined by 19.9% in China, while the home favourite Huawei saw its own shipments grow by 23%. Apple’s loss is Huawei’s gain, though it does appear the iChief is losing its prestige badge in the market.

These figures are of course estimates, as Apple has decided against telling anyone about specific shipment numbers, though the revenues over the last quarter give a decent idea. During the last quarterly results, revenues for the Greater China region declined by roughly 26% from $17.9 billion to $13.1 billion. In years gone, Apple used to be able to simply release a new colour variant of flagships and China consumers would be queuing out the door, but the bonanza is over for the moment.

The big question is why? Of course, there will be a preference from some for local brands, and there will of course be the cash-conscious. But ultimately you have to wonder whether Apple is living up to the brand promise which it spend so many years cultivating; where is the innovation?

Over the last decade, Apple has crafted a brand which is built on the principles of innovation and technological supremacy. Steve Jobs was the figurehead of this image, and many Apple enthusiasts were prepared to pay the premium on devices because of this identity. However, in recent years, Apple has done little to differentiate its devices and justify the pricing premium which is placed on products. Of course, this is not just Apple, innovation has stuttered across the segment, but gone is the assumption Apple immune to market trends.

With revenues declining across the international markets, and Apple set to sit out the initial 5G devices euphoria over the next couple of months, 2019 is starting to look like a very uncomfortable year for Apple.

If you thought your January was tough, Vodafone Idea just lost 35mn subs

Most people consider January one of the worst months of the year, but Vodafone Idea could potentially trump your misery after reporting a year-on-year decline of 35 million subscriptions.

As is now commonplace with any CEO of a major business, Balesh Sharma was all a twirl spinning off the tough times of the quarter as positives, and in fairness there are some valid points. From a financial perspective, total revenues decreased 2% year-on-year to roughly £1.27 billion, while total subscriptions declined from 422.3 million in Q3 to 387.2 million for the last three months.

“We are progressing well on our stated strategy,” said Sharma. “The initiatives taken during the quarter started showing encouraging trends by the end of the quarter.

“We are moving faster than expected on integration, specifically on the network front, and we are well on track to deliver our synergy targets. We remain focused on fortifying our position in key districts by expanding the coverage and capacity of our 4G network, and target a higher share of new 4G customers, while offering an enhanced network experience to our customers. The proceeds from the announced capital raise will put us in a strong position to achieve our strategic goals.”

Looking at Sharma’s reasons, firstly on the revenues it might not be as bad as it looks. The most recent figures are being compared to a period where the two firms accounting policies were not aligned, while there was always going to be a bit of heavy going through the initial integration process. On the subscriptions front, the team blamed the fact that various customers consolidated spending from multiple to single SIMs.

On the 4G side of things, the total subscription base did increase to 75.3 million, up 9.5 million during the quarter, while coverage has also increased. The combined business is starting to generate notable benefits, national roaming was introduced on both networks, with each brand now offering 4G across all 22 service regions. During the three months, 11,123 4G sites were added to the network.

At first glance, this might not be the most comfortable reading, but you have to bear in mind this is a business which is starting to find its feet. Merging two businesses is never the easiest of jobs, but with the threat of Reliance Jio causing havoc everywhere Indian telco executives look, the pressure is certainly higher.

Reliance Jio has forced evolution onto the Indian telco industry, with victims scattered all over the landscape. The Telenor evacuation was first, Airtel is flagging, Reliance Communications has been decimated and the merger between Vodafone and Idea was the other major casualty. The team has to be given time to create a business which can provide suitable resistance to the Reliance Jio momentum, but Sharma will be wary he doesn’t have much.

Jio claims another scalp as RCom is down and out

Reliance Communications has arguably gotten the sharpest end of the Jio stick over the last couple of years, but it seems the misery is finally over as the firm files for bankruptcy.

According to The Times of India, Chairman Anil Ambani has approached the National Company Law Tribunal to file for bankruptcy after a torrid couple of months which capped off a horrendous a couple of years. Although the team thought there might be some salvageable assets in a deal with Reliance Jio, this might prove to be the final chapter of the telco story for Anil.

Over the last couple of months, RCom has been attempting to navigate the red-tape maze to sell spectrum assets to Reliance Jio, though this transaction has been blocked due to no-one tackling responsibilities for debts owed to the Department of Telecommunications. The DoT was not willing to greenlight the deal until it had reassurances, though with RCom not able to pay and Jio not willing to, the deal entered a stalemate.

Of course, the plot thickens when you consider this cash was supposed to help RCom pay off various other debts, including one to Ericsson, which had been attempting to get Ambani arrested and imprisoned over the monies owed. It has all seemingly fizzled out into somewhat of a depressing end for RCom.

15 years ago, however, this would have been far from imaginable. The firm used to be one of the more promising telcos in a relatively lifeless market. India has long been one of the ‘BRIC’ nations, with potential fortunes enough to convince many to make a bet on the market. However, incumbent players were happy with the status quo and India fell behind the rest of the world in the digital rankings. That was until Anil’s brother Mukesh turned up with his new business Reliance Jio.

Reliance Jio changed the rules of the game and offered a disruptive data-driven service which appealed to the Indian consumer. Soon enough millions of Indians were ditching traditional telcos in pursuit of the glories hidden in digital society. RCom did not adapt and is now suffering the consequences of standing still for a decade.

RCom now joins a growing list of casualties in India. With the Vodafone/Idea merged business planning its assault, you have to hope this ‘new’ player will be able to offer some resistance to the Reliance Jio momentum. Although this is an admirable success story, there are a worryingly small number of telcos for such a vast market.