The net loss at Reliance Jio, India's newest and fastest-growing 4G service provider, has risen sharply in the recent financial year.
Figures show that RJio's net loss for the 2017 fiscal year widened to as much as 313.7 million Indian rupees ($4.9 million) from about INR157 million ($2.4 million) a year earlier.
The growing loss is mainly related to RJio's rollout of free promotional services from September last year, including a free voice service for life and a free data offer over a six-month period.
Having already spent more than INR1.7 trillion ($26.4 billion) on its operations, Reliance Jio plans to spend another INR180 billion ($2.8 billion) to further boost its network. That will include doubling the tower footprint by installing another 100,000 towers nationwide.
Thanks to the heavy spending and the attractiveness of its offerings, RJio has increased its subscriber base rapidly and was left with about 72 million customers in March after its stopped promoting its free deals. But it did not start charging customers for data services until this month, and its rates are extremely low.
Expectations are that RJio will generate revenues of about INR213 billion ($3.3 billion) in the fiscal year ending in March 2018, according to Moody's Investor Service. That forecast is based on the assumption that most of RJio's paid subscribers will opt for the plan that costs INR303 ($4.7) per month and includes complimentary services until June 2017.
"Assuming all 72 million subscribers pay INR303 per 28 days for July 2017 to March 2018, Jio will be able to generate revenue of about INR213 billion for the fiscal ending March 2018," said Moody's in a note.
Moody's does not expect RJio to become profitable until it triples its customer numbers to about 200 million. Brokerage firm CLSA also believes that RJio will become profitable in the 2019/20 fiscal year once it has acquired 200 million customers.
But to acquire more customers, RJio may have to match rivals on service quality, and competition from longer-established rivals is mounting. Indeed, the incumbents have been making significant investments in their networks to fend off the RJio challenge.
RJio cannot be accused of standing still, though. It has similarly been ramping up network investments to expand coverage and improve service quality. According to the Telecom Regulatory Authority of India (TRAI) , the connection speed of 16/48 Mbit/s on RJio's network makes it the fastest 4G service in the country.
RJio is not short on ambition, either. According to its recent investor presentation, it aims to capture at least one half of an Indian data market it expects will be worth around INR3 trillion ($46.7 billion) by 2021.
Interestingly, RJio's monthly tariff of INR303 ($4.7) is significantly higher than the average Indian ARPU (average revenue per user) of INR175, indicating that RJio is not targeting the bottom segment of the market for growth. Its focus on apps and other forthcoming data products, such connected car and smart home services, also points toward interest in serving potentially more lucrative customer groups.
India's data market has certainly exploded following RJio's entry. Monthly data consumption in the country has soared from about 200 million gigabytes before RJio's launch to around 1 billion gigabytes today. That makes India the world's biggest mobile data market on the basis of the traffic whizzing across networks.
— Gagandeep Kaur, contributing editor, special to Light Reading