Reliance Jio was hit by subscriber decline in the July-September quarter, a first since it launched services in 2016.

While Jio’s gross subscriber additions were a healthy at 35.6 million during the July-September quarter, a 47 million churn in subscribers resulted in a net subscriber decline of 11.1 million in the second quarter.

While the operator said the dip in user base was due to exit of low-end subscribers as they could not afford to recharge during the second wave of the pandemic, analyst expressed concern over the decline.

Brokerage firm Jefferies has cut its FY22-24 subscriber estimates by 5 per cent and expect RJio to add 49 million subscribers over FY22-24.

Jio’s second quarter margins were up a mere 9 basis points with incremental margins remaining low at 50 per cent. Reliance Jio’s cash flow from operations (CFO) for the first six months of the year was down 20 per cent YoY and lagged EBITDA growth of 21 per cent YoY, due to higher working capital. Lower CFO along with 4.6x YoY jump in cash capex to ₹15,800 crore resulted in cash burn of ₹2,100 crore in H1 of FY22.

“We cut our FY22-24 revenue estimates by 1-2 per cent, EBITDA estimates by 2-4 per cent and profit estimates by 2-7 per cent to factor the 2Q miss. We cut our RJio valuation by 2 per cent to $88 billion on the back of estimate cuts and lower multiple for mobile business,” Jefferies said in a note.

A repeat of Jio’s second quarter subscriber performance in the third quarter may dash hopes of a tariff hike in the near/medium term. The telecom industry has been looking at a tariff hike to boost revenue, but recent trends show that operators have lost subscribers soon after increasing tariffs.