Reliance Industries Heads For Biggest Gain In Eight Years
Reliance Jio extends introductory offers, for another year beyond March 2017
KEY HIGHLIGHTS
RIL Rallies To Its Highest Level Since June 2009
A day after announcing that Reliance Jio acquired 10 crore customers in the first 170 days of operations, the RIL stock rallied as much as 10.22 percent to Rs 1,199.45, its highest level since June 2009.
However, none of the 39 analysts tracking RIL have changed their rating on the stock. The consensus price target has been raised by Rs 4 to Rs 1,207 since Tuesday's announcement, according to the data provided by Bloomberg.
This is RIL's highest intraday jump since May 16, 2014, the day Narendra Modi-led Bharatiya Janta Party won the country's general elections. The stock climbed as much as 8.72 percent that day.
Analysts’ Take
“Net profit from the telecom unit could take another three to five years, but as long as it is moving in the right direction there is a certain upside in the stock,” Naveen Kulkarni, telecom analyst at PhillipCapital told BloombergQuint on the phone.
Reliance will start charging customers, this is the biggest positive here. Secondly, telecom industry is as such in a consolidation mode, so people have started to believe that Jio will make some money in this business. There was a huge amount of negativity around this business and now this goes out as the business will start making some money.Naveen Kulkarni, Telecom Analyst, PhillipCapital
Mukesh Ambani announced on Tuesday that Jio will begin charging for its services from April 1. Users who adopt Jio before March 31 will have the option of signing up for a new scheme - Jio Prime, for a one-time fee of Rs 99, plus a monthly charge of Rs 303.
The customers who sign up for Prime will be able to use existing unlimited services for a year, Ambani added.
The rollout of the Prime offer will help Reliance Jio turn profitable on an earnings before interest, tax, depreciation and amortisation basis by financial year 2018-19, Jal Irani, senior vice president at Edelweiss Financial Services told BloombergQuint on the phone.
The potential average revenue per user could be around Rs 220 compared to Rs 175 that we were assuming earlier. The sensitivity of the ARPU to the bottom line is very large. A potential 10 percent increase in ARPU could increase RIL’s profit by 5 percent. Therefore RIL could start making money fast on the Rs 303 plan. We expect the EBITDA profitability for Reliance Jio by FY19.Jal Irani, Senior VP, Edelweiss Financial Services
Improving revenue visibility for Jio may prompt RIL to list the telecom business separately in 2017-18, according to Deven Choksey of KR Choksey Securities.
Market was skeptical about revenue part of Reliance and the visibility of earnings. Now with some clarity with number of customers they have and they are adding, it is suggest that Reliance from Jio platform could see a full year revenue visibility of Rs 50,000-60,000 crore by middle of calendar year 2018. This could attract large part of investors and I think there is a distinct possibility of announcement coming from Reliance in 2017-18 on separating out Jio from Reliance (listing Reliance Jio separetely) to unlock its value.Deven Choksey, MD, KR Choksey Securities
What's New
- Reliance Jio's free data will come to end starting April 2017
- Mukesh Ambani announces 'Jio Prime' offer at a membership fee of Rs 99
- Jio Prime offers 30 GB data at 4G speed, free voice calls for Rs 303 per month
- Reliance Jio crossed the 10 crore user mark in 170 days since launch, claims the company
- Jio users consumed 100 crore GB data in January 2017
Some Relief To The Industry?
Here’s how analysts reacted to Reliance Jio’s ‘Jio Prime’ offer.
It is good that Reliance Jio has started charging. It is positive for the industry as it had been very difficult on the other operators as the growth was curtailed. So now we will have to see what are the other tariff plans and the reaction when the tariff plans hit the market.Kunal Bajaj, Telecom Expert & Consultant
This announcement was on expected lines. This prices are still extremely low when compared to other incumbents and it’s not entirely good for the sector as revenues have fallen drastically.Mahesh Uppal, Telecom Analyst And Director Of Consultancy Firm Com First India
Subsidised Rates Continue
Existing customers of the Happy New Year Plan have the option of paying an enrollment fee of Rs 99 before March 31, 2017, when the offer comes to an end. This also applies to any new subscriber who joins on or before March 31, Ambani said. While the free services will come to an end, all subscribers will have to shell out Rs 303 a month to avail the services enjoyed as of now, which includes 30 GB of data a month and free voice calls across circles.
Reliance Jio Crosses 10 Crore Subscribers
Reliance Jio claims it has crossed the 10 crore subscribers mark in just over 5 months, since its launch on September 5, 2016. Reliance Infocomm Ltd.’s chairman, Mukesh Ambani held a press conference on Tuesday to make the announcement. As of December, India’s total mobile subscriber base grew 2.5 percent, or by 2.8 crore users, with Reliance Jio garnering more than 72 percent of the new connections over the last four months. The Mukesh Ambani-led operator then had 7.21 crore users within four months of launching its services. According to data provided by the Telecom Regulatory Authority of India (TRAI) Jio had 6.4 percent of the total wireless customers in India as of December.
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Idea Cellular Ltd. reigned in next with 28.4 lakh new entrants in December while the country’s largest telecom operator Bharti Airtel Ltd., added 25 lakh subscribers. Vodafone India gained less than 19 lakh new users during the same month. Jio has challenged its rivals by offering free voice and data services, which has now been extended till March 2017.
Tiff With Existing Operators
Soon after its launch in September, Reliance Jio and some existing operators, led by the Cellular Operators Association of India (COAI) entered into a war of wards accusing operators like Bharti Airtel of engaging in anti-competitive practices. It alleged that Airtel’s claim of providing over 35,000 point of interconnections (PoIs) is misleading as they haven't even completed port allocation, which is the first step of implementation for over 1,100 PoIs. It added that Airtel is deliberately delaying the process.
Airtel, on the other hand, maintained its position saying, it had provided 35,000 PoIs at an “unprecedented rate” of five months and that the capacity provided to Jio was “far higher than the comparable capacity provided by Airtel to other operators”.