Reliance Jio, the telecom arm of Reliance Industries Ltd (RIL), announced its half yearly results for the fiscal year 2017. It reported a net loss of Rs. 22.5 crores during the first six-month period ended on 31 March 2017. In context, the company has posted a net loss of Rs. 7.46 crore during the same period for the fiscal year 2016. The increase in losses can be ascribed to the free services offered by the company during this time.
The income also nosedived to Rs. 54 lakh against Rs. 2.25 crores during the same period a year ago. However, the commercial launch of Jio on 1st April may turn around the fortunes for the company. The income will certainly see a surge during next quarters.
Although the results look alarming, the company has got deep pockets to fund the losses incurred during its initial phases. Credit Suisse, Switzerland-based financial institution, expressed faith in Jio’s ability to endure losses till it becomes profitable.
Credit Suisse, in a report dated 21 April said, “Given the strength of RIL’s balance sheet, RIL’s ability to fund losses is also higher than that of peers. Jio’s primary target is likely raising revenue market share as aggressively as possible. We highlight every 1% incremental market share (by FY25) could be worth $1.4 billion in net present value (higher eventual free cash flows) to a large telecom operator.”
Jio’s predominant target is to acquire large customer base, thus, gaining market share. However, the strategy may not be viable in the long run. Hence, Jio needs to look for profits to make sure it is not diving into the abyss.
Recently the company has stated that 72 million customers have subscribed to its Prime membership. It is currently offering mouth-watering plans under Jio Dhan Dhana Dhan offer.