Netflix Misses Subscriber Target by 50%, Jio Overtakes Airtel to Become Second-Largest Mobile Network Operator, TikTok App Under Scrutiny

PMO instructs IT Ministry to keep an eye on TikTok App. After PNB, Punjab & Sind Bank also reports being defrauded by Bhushan Power. Jio overtakes Airtel to become second-largest mobile network operator. Netflix hits revenue targets but misses its subscriber target by almost 50%. To offset its losing base in the US, Netflix hopes cheaper plans in India will help it stay afloat. Elon Musk reveals details of his secret “brain-machine interface” startup Neuralink. China registers slowest quarterly GDP growth in 27 years. India Inc struggles to balance its sheets.

 

Moving on to the top Business news of the week.  

 

 COMPANIES 

Yes Bank’s share price falls below book value as YoY profits fall by 91%. After PNB, Punjab & Sind Bank also reports being defrauded by Bhushan Power. Favoured ratings were falsely engineered by IFIN officials, reveals Grant Thornton India report. 

Unbroken Fall: Yes Bank’s YoY profits plunged by more than 91% while slippages in the June quarter were 10%, the highest for any quarter in a decade.

The crisis-hit bank managed to turn a standalone profit of INR113.76cr against the INR1,506.64cr loss of the previous quarter.

But this didn’t pacify the stock price, which fell almost 15% to reach a 52-week of INR83.7 – which is below the book value of INR114.3.

Double Whammy: Earlier this month, PNB had reported Bhushan Power & Steel’s INR3,805cr fraud.

Now, Punjab & Sind Bank has also reported fraud by Bhushan Power, this time to the tune of INR238.3cr. This caused the bank’s share price to drop by 6% intraday.

 

Auditors with Benefits: An investigation report by Grant Thornton India has revealed that credit agencies such as Brickwork Ratings and Fitch Ratings had given positive ratings to IL&FS Financial Services (IFIN) after receiving favours from the company. 

 

A Donation, A Match, A House: As per the report, these favours included an invitation to an official of Brickworks to a Real Madrid match in Europe, helping a senior in Fitch Ratings in negotiating a property deal, and hefty contributions to Sameeksha Trust – to which former ICRA Chairman DN Ghosh was associated. 

 

The audit firm also found instances where the ratings were allegedly ‘prepared’ by the erstwhile directors of the company. 
 

The Usual Suspects: ICRA, CARE, India Ratings and Brickwork Ratings were the companies involved in rating various instruments of IFIN during 2013-2018. 
 


The news comes over a year after the IL&FS scam worth INR91,000cr surfaced.


  

 RELIANCE 

Reliance Q1 profit rises 7% YoY to INR 10,104cr. Jio overtakes Airtel to become second-largest mobile network operator; average revenue per user (ARPU) has been declining consistently over the past six quarters. Is a tariff hike in the offing? Brookfield to infuse INR25,000cr into RIL's telecom tower arm.

 

Up and Up: Reliance Industries on Friday reported c. 7% Y-o-Y rise in profit at INR10,104cr in Q1 spurred by robust growth in telecom and retail businesses. 
 


The company’s overall revenue increased 21.25% to INR1.61L cr in Q1 vs INR1.33L cr last year.  

 
Telecom unit Jio reported 45.60% rise in profit at INR891cr while sales of retail unit grew 47.5% to INR38,196cr. 

 
View a detailed breakdown of the Q1 financials here.

 
Marching Ahead: Reliance Jio has overtaken Bharti Airtel to become the second-largest operator in India according to mobile subscriber base, recently revealed a data by TRAI. 


 
As of May end, Jio had 322.98 million users while Airtel had 320.38 million. Vodafone Idea continues to lead the list with 387.55 million users.
 


However, it is important to note here that while its subscriber base is rapidly increasing, Jio’s average revenue per user (ARPU) has declined consistently over the past six quarters. Its ARPU for the June 2019 quarter was at INR122, down from INR126.2 in the March 2019 quarter and INR130 in the December 2018 quarter. It was at its peak of INR154 in the December 2017 quarter.
 


This essentially means that every incremental user contributes less to the total revenue. This is bound to be worrying for the telecom giant and may push it to increase prices. 
 


Meanwhile…: Rivals Airtel and Vodafone Idea have started weeding out inactive customers through minimum monthly recharge plans of INR35, launched in November.


 
In the single largest foreign investment in an Indian infrastructure vehicle till date, Reliance Industrial Investments and Holdings (RIIHL), a wholly-owned subsidiary of Reliance Industries has entered into an agreement with BIF IV Jarvis India, an affiliate of Canada-based Brookfield Asset Management for an investment by Brookfield (along with co-investors) of INR25,215cr in the units proposed to be issued by the Tower Infrastructure Trust.
 


FYI: RIIHL is the sponsor of the trust, which holds 51% share capital of Reliance Jio lnfratel Private Limited (RJIPL), an entity to which the tower assets undertaking of Reliance Jio were recently transferred.

 
The proceeds from the investment, if it goes through, will be used to repay certain existing financial liabilities of RJIPL and to acquire the remaining 49% of equity share capital of RJIPL, currently held by RIL.

 

 NETFLIX  

Netflix hits revenue targets but misses its subscriber target by almost 50%. To offset its losing base in the US, Netflix hopes cheaper plans in India will help it stay afloat.

 

Netflix Ain’t Chill: Continuous subscription price hikes have caught up with the streaming giant. Netflix added only about half (2.7 million) as many paid subscribers as it had promised (5 million).

But revenue numbers ($4.92bn) were in line with investors’ expectations ($4.93bn). Despite this, Netflix’s stock price plummeted by 10%. Ah well, Stranger Things have happened.

 

Netflix says this setback is only temporary and it will add seven million subscribers this quarter. But the road is becoming increasingly rocky for the streaming giant, with increasing competition and its two most popular shows (The Office and Friends) scheduled to soon be pulled off the platform. Unless Netflix delivers on its promise for this quarter, it could all fall down like a House of Cards.

 

Michael Scott in a Kurta: Last quarter, Netflix said it would gain 300,000 subscribers in the US. Instead, it lost 130,000. No wonder the company is looking beyond the land of the free to stay afloat.

 

And what other market is as massive and young and promising as India? Netflix made this clear in its rationalisation for aiming to add seven million subscribers this quarter – India would lead the way.

 

How? Netflix hopes an INR250/month mobile-only app will help.

 

 TECH   

PMO instructs IT Ministry to keep an eye on TikTok. Elon Musk reveals details of his secret “brain-machine interface” startup Neuralink. The duck that’s taking on Silicon Valley giants. 

 

TikTok in the Dock: Last week, the Ministry of Electronics & IT had submitted a report to the PMO saying TikTok was in compliance with legal requirements including traceability of messages, user data security and safety of underage users. TikTok itself had submitted a report to the government affirming its compliance to regulations.
 


But the popular Chinese app has caught the Prime Minister’s eye. Considering the complaints against the app across the world (in fact, the app was temporarily banned by the Madras High Court earlier this year), the PMO has reportedly asked the nodal ministry to closely monitor and keep an eye on it.


 
Out of the Shadows: Elon Musk on Tuesday evening for the first time revealed some details on the progress of its secret “brain-machine interface” startup, Neuralink. 


 
Read Your Mind: Conceived in 2017, the project claims to have designed very small “threads” – smaller than a human hair – that can be injected into the brain to detect the activity of neurons. 


 
These implants could potentially allow human beings with symptoms of chronic medical conditions, including epilepsy, to control computers and smartphones using their thoughts.
 


Details of the startup here.

  
A Duck With A Dream: When it comes to search engines, “Google” and “internet search” are synonymous. There are over a hundred search engines, but Google is king.
 


How do you beat a Goliath? Yes, with a David. But how do you beat a Goliath so huge his market share is a ridiculous 92.62%?


 
One rival search engine is attempting this near-unimaginable task. DuckDuckGo began in 2008 but really took off after 2013 when the Snowden affair brought surveillance and privacy into mainstream debate.

 
Why Did This Help DuckDuckGo?: Because DuckDuckGo projects itself as Google with a conscience. Its main selling point is that it does everything Google search does but without tracking you (something the Mountain View company is very, very proficient at).

 
The growing concerns over online privacy helped DuckDuckGo, which tripled over the past two years and now handles 40 million searches a day. But its share of the search engine market is still below 1% - a tiny drop in an ocean the size of Google.

 

 CHINA 

China registers slowest quarterly GDP growth in 27 years. India Inc struggles to balance its sheets.


How To Tame A Dragon: The trade war continues to take a toll on China’s economy. Second-quarter results released today pegged GDP growth at 6.2%, the lowest since the first quarter of 1992, which was when records began.


China’s Y-o-Y growth has been declining since Q1 2018 from 6.8% to 6.2% today.
 
 
While the numbers are a new low for China, they were still within most analysts’ expectations. Which is why stocks rose and global markets welcomed the news.
 

 

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