Mumbai: Almost two-thirds of Reliance Jio Infocomm Ltd’s subscribers at the end of March had signed up for the so-called Prime subscription, indicating their willingness to pay for the service—belying analyst expectations that the user base would fall once the company started charging.

Jio, which crossed the 100 million mark in February, barely six months after it was launched, ended the financial year with 108.9 million subscribers as of 31 March. Of this, 72 million had signed up to be Prime subscribers.

The March-end numbers show that two-thirds of its users are willing to become paid subscribers— better than the 60% forecast by analysts. The firm expects its paid subscriber base to touch 100 million “fairly soon", said Anshuman Thakur, head of strategy and planning at Reliance Industries Ltd (RIL), the promoter of Jio.

On 11 April, Jio launched a new plan—Dhan Dhana Dhan—that offers its Prime members 1GB data per day at 4G speeds for 84 days at Rs309. The company launched this offer after it was asked to withdraw its Summer Surprise offer by the Telecom Regulatory Authority of India.

It will take some time for the 72 million paid users and their 2.2 billion minutes a day voice and video minutes to become evident in the earnings of the company. For most subscribers, Jio’s offerings were free till 31 March. Not surprisingly, for the six months ended March, the company reported revenue of only Rs54 lakh. Jio also reported a net loss of Rs22.5 crore for the half year ended March. The number is low because Jio capitalised its expenses.

Indian accounting standards allow firms to capitalize their expense—or route them through the balance sheet instead of the profit and loss account—until a project is complete. In a note to accounts, Reliance Jio said it would stop capitalizing expenses only “when the assets are available for use in the manner as intended by the management, i.e when all the quality of service parameters set by the management are met".

Jio’s balance sheet reflects these capitalized expenses and the huge investments that have gone into this company with a size of Rs2 trillion at the end of March.

“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," wrote Credit Suisse analysts in a 21 April report. Reliance Jio has debt of close to Rs47,000 crore and a debt-equity ratio of 0.67 times.

Since the start of the project, Reliance Industries has invested Rs1.79 trillion in its telecom venture with Rs45,000 crore of equity infusion. The firm has a target to ramp up total investments to Rs2.5 trillion.

While Reliance’s Thakur did not disclose the capital expenditure scheduled for Jio for the current fiscal year, he said that during the April-June quarter the company would be investing another Rs18,000 crore. “We see a drop in Jio’s capex going forward. Currently we are spending on expanding our coverage and de-bottlenecking after which we see a drop in the capex," said Thakur.

“We are going to increase our population coverage to 95% plus this year and we are working towards that," he added.

Separately, in a statement to the stock exchanges, Reliance Industries Ltd, which owns Jio, said it was adding 100,000 towers in the coming months, thus doubling its tower base.

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