Piyush Gupta
$8/hr
Chartered Account (equivalent to CPA) - PwC Experience
- Reply rate:
- -
- Availability:
- Hourly ($/hour)
- Age:
- 28 years old
- Location:
- Ahmedabad, Gujarat, India
- Experience:
- 4 years
RESEARCH REPORT - JIO
INDIA’S LEADING TELECOM COMPANY
RESEARCH REPORT – JIO PLATFORMS
CONTENT
1. Reliance Group – Man Made Dream ……………………………… 2
2. Reliance Group – Business Snapshots……………........................... 5
3. Reliance Group – Sector & Synergies………………....................... 7
4. Reliance Group - Financial Performance………………………….. 8
5. JIO Platforms – Introduction………………………………………. 11
6. JIO Platforms – Global Partners…………………………………… 15
7. JIO Platforms – Strengths ………………………………………..... 17
8. Innovation and portfolio of applications…………………………... 20
9. Financial Metrics – JIO……………………………………............. 23
10.
What Future holds? …………………………………….............. 39
11.
Indian Telecom Sector………………………………………….. 42
12.
Recommendations………………………………………………. 49
13.
Sources of Information …………………………………………. 51
Page 1 of 50
RESEARCH REPORT – JIO PLATFORMS
RELIANCE GROUP – A MAN MADE DREAM
MODEST BEGINNINGS MAMMOTH ASPIRATIONS
Dhirubhai Ambani Returns To India In 1957 After A Stint With A. Besse &
Co., Aden, Yemen. He Starts a Yarn Trading Business from a Small 500 Sq.
Ft. Office in Masjid Bunder, Mumbai, But Dreams Of Establishing India’s
Largest Company.
WEALTH CREATION FOR ALL INDIANS
In 1977, Reliance Textile Industries’ Ipo Creates History By Introducing
The Equity Cult In India. The Issue Is Oversubscribed Seven Times,
Strengthening Reliance’s Growth Ambitions.
INTEGRATING BACKWARD RACING FORWARD
Reliance Sets Up a Mill In Naroda, Gujarat, Sparking Off Reliance’s
Backward Integration Journey. Mukesh Ambani Leads the Establishment of
Reliance’s First Mega Manufacturing Project at Patalganga in a Record 18
Months.
ENHANCING THE LIFESTYLE OF EVERY INDIAN
Reliance’s Backward Integration Journey Continues. The Hazira Plant
Page
2 of 50
Coming on Stream In 1991
Laid
The Foundation For Reliance Becoming
The World’s Largest Integrated Producer Of Polyester.
RESEARCH REPORT – JIO PLATFORMS
RELIANCE GROUP – A MAN MADE DREAM
INDIA ARRIVES ON THE GLOBAL REFINING MAP
In 2000, Reliance commissions the world's largest grassroots refinery in a
record 36 months: the Jamnagar petrochemicals and integrated refinery
complex. With the development of the associated green belt, the desert
surrounding Jamnagar becomes home to another man-made wonder – Asia’s
largest mango orchard!
TRIGGERING A TELECOM REVOLUTION
In 2002, Reliance enters the Infocomm business and brings about a
revolution in mobile telephony in India. In 2005, Reliance makes a strategic
decision to reorganise its businesses through a demerger. Power generation
and distribution, financial services and telecommunication services are
demerged into separate entities.
JOINING THE GLOBAL GIANTS CLUB
In 2004, Reliance emerges as the first and only private Indian organisation
to be listed in the Fortune Global 500 list. Reliance is also the first private
sector company to be rated by international credit rating agencies - including
Moody's, Standard and Poor's.
Page 3 of 50
RESEARCH REPORT – JIO PLATFORMS
RELIANCE GROUP – A MAN MADE DREAM
INVESTING IN THE ENERGY SECURITY OF INDIA
In 2009, Reliance commences production of hydrocarbons in its KGD6
block - against all odds - in just over two years of its discovery, making it
the world’s fastest green-field deepwater oil development project. With this
development, Reliance completes an unprecedented backward integration
journey.
INNOVATION-LED GROWTH CONTINUES
Reliance Jio Infocomm Ltd., ushers in a pan-India digital revolution through
state-of-the-art wireless broadband 4G services, promising to bridge the
digital divide.
CREATING EXPONENTIAL VALUE
In 2019, Reliance becomes the first Indian company to cross ₹10 trillion
market capitalisation. Chairman and Managing Director Mr. Mukesh
Ambani says, “In just four decades, Reliance has grown from a small start
up to one of the largest, most admired companies in the world." In 2020,
Reliance ranks as the 48th highest valued company in the world.
Page 4 of 50
RESEARCH REPORT – JIO PLATFORMS
RELIANCE GROUP – BUSINESS SNAPSHOTS
Reliance is India’s largest and most profitable private sector company. Reliance continues to be a
significant global player in the integrated energy value chain while establishing leadership
positions in the retail and digital services business in India.
STOCK MARKET HIGHLIGHTS
CMP (as on 31st July 2020)
Target Price
INR 2,067
INR 2,250 (+7%)
NIFTY
Bloomberg Code
No. of shares (mn)
11,073
RIL IN
6,339
MCap (INR bn)/ ($ bn)
6m avg traded value (INR mn)
52 Week high/low
13,104/175,154
34,626
INR 2,199/867
Stock Price History – RIL (Source Yahoo Finance)
Page 5 of 50
RESEARCH REPORT – JIO PLATFORMS
RELIANCE GROUP – BUSINESS SNAPSHOTS
Stock Performance
3M
6M
12M
Absolute (%)
42.3
47.8
78.9
Relative (%)
30.8
55.5
78.6
SHAREHOLDING PATTERN
CMP (as on 31st July
2020)
Promoters
FIs & Local MFs
FPIs
Public & others
Pledged Shares
June-20
Mar-20
-
-
Source: Bombay Stock Exchange
Stock Performance
Absolute (%)
Relative (%)
3M
6M
12M
42.3
30.8
47.8
55.5
78.9
78.6
Source: Bombay Stock Exchange
Page 6 of 50
RESEARCH REPORT – JIO PLATFORMS
RELIANCE GROUP – SECTORS & SYNERGIES
Page 7 of 50
RESEARCH REPORT – JIO PLATFORMS
Consolidated Income Statement
YE Mar (INR bn)
FY18
FY19
FY20
FY21E
FY22E
FY23E
Revenues
3,917
5,692
5,967
4,579
5,662
6,491
Growth %
28.3
45.3
4.8
-23.3
23.7
14.6
2,675
3,945
4,052
2,892
3,547
4,100
Employee Cost
95
125
141
169
199
215
Other Expenses
505
781
892
820
970
1,102
EBITDA
642
841
882
698
946
1,074
EBIDTA Margin (%)
16.4
14.8
14.8
15.2
16.7
16.5
EBITDA Growth %
38.9
31.0
4.9
-20.9
35.5
13.5
Depreciation
167
209
222
216
230
242
EBIT
475
632
660
482
716
832
Other Income (Including EO Items)
99
84
95
196
233
248
Interest
81
165
220
229
227
218
PBT
493
551
535
449
722
862
Tax
133
154
137
112
173
212
RPAT before minority interest
360
397
398
337
549
650
1
-1
-4
-4
-4
-4
RPAT after adjusting for
Associates/Minority interest
EO (Loss) / Profit (Net Of Tax)
361
396
394
333
545
646
-
-
-
-
-
APAT
361
396
-
333
545
646
APAT Growth (%)
20.6
9.7
8.1
-22.2
63.7
18.5
Raw Material
Share of associates/Minority interest
Source: Company Data
Page 8 of 50
RESEARCH REPORT – JIO PLATFORMS
Consolidated Balance Sheet
YE Mar (INR bn)
FY18
FY19
FY20
FY21E
FY22E
FY23E
59
59
63
64
68
68
Reserves And Surplus
2,876
3,812
4,470
4,905
5,792
6,371
Total Equity
2,935
3,871
4,533
4,969
5,860
6,439
35
83
80
83
88
92
Long-term Debt
1,442
2,075
1,976
1,956
1,766
1,678
Short-term Debt
746
800
1,387
1,037
847
822
2,188
2,875
3,363
2,993
2,613
2,500
Deferred Tax Liability
448
645
705
629
630
631
Long-term Provision
114
162
206
207
208
209
5,720
7,636
8,887
8,881
9,399
9,871
Net Block
3,981
3,864
5,224
4,814
4,920
5,026
Capital WIP
1,870
1,795
1,091
1,019
1,082
1,114
Goodwill on consolidation
58
120
103
103
103
103
LT Loans And Advances
27
55
217
217
164
148
Non-current investments
253
1,646
2,039
442
464
487
87
223
374
388
402
417
6,276
7,703
9,048
6,983
7,135
7,295
Inventories
608
676
739
598
593
585
Debtors
176
301
197
179
207
232
43
111
309
2,049
2,546
2,811
ST Loans And Advances
108
5
7
-
-
-
Other Current Assets
328
471
602
542
498
476
Current investments
576
710
729
729
729
729
Total Current Assets
1,839
2,274
2,583
4,097
4,573
4,833
Creditors
1,069
1,083
968
677
915
1,008
Other Current Liabilities &
Provns
Total Current Liabilities
1,326
1,258
1,776
1,522
1,394
1,249
2,395
2,341
2,744
2,199
2,309
2,257
-556
-67
-161
1,898
2,264
2,576
5,720
7,636
8,887
8,881
9,399
9,871
SOURCES OF FUNDS
Share Capital
Minority Interest
Total Debt
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Non-current assets
Total Non-current Assets
Cash and Cash Equivalent
Net Current Assets
TOTAL APPLICATION OF
FUNDS
Source: Company Data
Page 9 of 50
RESEARCH REPORT – JIO PLATFORMS
Key Ratios
(INR bn)
FY18
FY19
FY20
FY21E
FY22E
FY23E
EBITDA Margin
16.4
14.8
14.8
15.2
16.7
16.5
EBIT Margin
APAT Margin
RoE
-
-
-
-
-
-
RoIC
13.7
12.2
11.2
6.8
10.3
11.8
RoCE
7.7
7.7
7.2
5.7
7.9
8.4
Tax Rate %
Fixed Asset Turnover (x)
27
0.8
27.9
1
25.7
0.9
24.8
0.6
23.9
0.8
24.6
0.8
Inventory (days)
Debtor (days)
Other Current Assets (days)
Payables (days)
-
-
-
-
-
-
181
-
116
-
160
-
192
-
143
-154
-0.7
-
111
-128
-1
-
60.9
66.8
67.4
51.7
80.7
95.5
-
-
-
-
-
-
P/E (x)
33.9
30.9
30.7
39.9
25.6
21.6
P/Cash EPS (x)
P/BV (x)
EV/EBITDA (x)
EV/Revenue (x)
-
-
-
-
-
-
Dividend Yield (%)
OCF/EV (%)
FCFF/EV (%)
0.3
4.5
-1.2
0.3
3
2.5
0.3
7.2
1.7
0.2
1.4
3.3
0.3
7.1
4
0.4
6.6
3.5
FCFE/M Cap (%)
-0.2
6.8
4
-1.1
PROFITABILITY %
EFFICIENCY
Other Current Liab & Provns (days)
Cash Conversion Cycle (days)
Net Debt/EBITDA (x)
Net D/E
Interest Coverage
PER SHARE DATA (INR)
EPS
CEPS
Dividend
Book Value
VALUATION
Page 10 of 50
-0.8
0.8
Source: Company Data
RESEARCH REPORT – JIO PLATFORMS
DIGITAL JOURNEY OF RELIANCE GROUP
JIO Platforms
Page 11 of 50
RESEARCH REPORT – JIO PLATFORMS
“NEXT GENERATION TECHNOLOGY COMPANY BUILDING
A DIGITAL SOCIETY FOR INDIA BY BRINGING TOGETHER
JIO’S LEADING DIGITAL APPS, DIGITAL ECOSYSTEMS
AND INDIA’S #1 HIGH SPEED CONNECTIVITY PLATFORM
UNDER ONE UMBRELLA”
VISION – To connect everyone and everything, everywhere – always at the highest quality
and the most affordable price. Jio’s vision is to transform India with the power of digital
revolution.
JIO continues to drive the digital revolution
JIO continues to drive the digital revolution in India with 387.50 million subscribers
becoming a part of the Jio ecosystems as of March 31, 2020. JIO was built on the core
thesis of the transformative power of data with connectivity as an enabler. It has
delivered the fastest at scale connectivity user onboarding and is now layering on a
robust digital services ecosystem of apps while leveraging its deep technology
capabilities.
As a first step towards creating the digital services ecosystem in the country, Reliance
JIO has been the key catalyst in creating the broadband data market in India. It is now
the #1 ranked mobile telecom operator in the country by both Adjusted Gross Revenue
(AGR) and subscribers.
To further facilitate this from the perspective of a business organization, Jio has
consolidated all its technology capabilities, investments and connectivity businesses into
a single-holding company called Jio Platforms Limited.
Page 12 of 50
RESEARCH REPORT – JIO PLATFORMS
STRATEGY
Quality
Jio offers services on an all-IP, LTE network with best-in-class customer service, easy
app-based customer interaction for query resolution and recharges, and AI-based bots to
provide seamless onboarding and service experience.
Agility
Jio’s adoption of an agile model while developing its systems has supported its ability to
scale and adapt in an orderly manner.
Affordability
Affordable and simple pricing plans have been the key to the large-scale adoption of Jio
services. Jio has been able to offer these on the back of superior technology- based
operating efficiencies, enabling it to offer services at the most affordable price.
Coverage
Coverage refers to anytime, anywhere mobile broadband access. Jio’s 4G coverage at
present is greater than 2G coverage in India with close to 99% population coverage. This
coverage is backed by pan-India 4G spectrum across three bands and the best fiber and
tower infrastructure in the country, providing the best network experience and farthest
reach.
Data
Average per capita data consumption on Jio’s networks is 11+ GB per month with
potential upside from new use cases coming up every day.
Page 13 of 50
RESEARCH REPORT – JIO PLATFORMS
EXPONENTIAL GROWTH IN DATA USAGE
Increasing adoption of broadband services has led to a 50% y-o-y growth
in wireless data usage across the country over FY 2018-19. Increasing
availability of devices, improving network penetration, higher affordability
for data services and emerging new use cases are likely to sustain this
exponential growth in data demand.
Jio with affordable data plans has been the primary driver of data boom in
India over the past three years. Prior to the launch of Jio services, the total
mobile data traffic across all networks in India was 0.2 Exabytes per month.
At present, Jio network alone carries over 4.5 Exabytes per month, with the
industry data traffic of more than 7.5 Exabytes per month.
As per data in the Ericsson Mobility Report 2019, mobile data in India is
expected to grow 3X during 2019-25E, with mobile broadband
subscriptions expected to double during the same period. The government’s
endeavor to roll out next- generation data network in the remotest corner
of the country for all citizens would accelerate this transition towards a
digital society.
Page 14 of 50
ABOUT
JIO
PLATFORM
RESEARCH REPORT – JIO PLATFORMS
PARTNERSHIPS WITH GLOBAL TECHNOLOGY LEADERS
Jio’s success in building technology, specifically for India and its ability
to proliferate across the country has attracted global technology leaders –
Facebook and Microsoft—to forge partnerships with it.
Facebook – In April 2020, RIL, Jio Platforms Limited and Facebook Inc.
announced the signing of binding agreements for an investment of `43,574
crore by Facebook into Jio Platforms. This investment by Facebook valued
Jio Platforms at 4.6 lakh crore pre-money Enterprise Value. Facebook’s
investment translated into a 9.99% equity stake in Jio Platforms on a fully
diluted basis.
GLOBAL
PARTNERS
IN
Concurrent with the investment, Jio Platforms, Reliance Retail Limited
and WhatsApp also entered into a commercial partnership agreement to
further accelerate Reliance Retail’s Digital Commerce business on the
JioMart platform using WhatsApp and to support small businesses on
WhatsApp. The companies will work closely to ensure that consumers are
able to access the nearest kiranas who can provide products and services
to their homes by transacting seamlessly with JioMart using WhatsApp.
Microsoft – In August 2019, Jio and Microsoft Corp. embarked on a
unique, comprehensive, long-term strategic relationship aimed at
accelerating the digital transformation of the Indian economy and society.
This 10-year commitment combines the world-class capabilities of both
companies to offer a detailed set of solutions comprising connectivity,
computing, storage solutions, and other technology services and
applications essential for Indian businesses. It will span the broad Reliance
Industries ecosystem including its existing and new businesses.
Page 15 of 50
JIO
PLATFORM
S
RESEARCH REPORT – JIO PLATFORMS
The aim of the partnership is to enhance the adoption of leading
technologies such as data analytics, AI, cognitive services, Blockchain,
IoT, and edge computing among SMEs to make them ready to compete
and grow, while helping accelerate technology-led GDP growth in India
and driving adoption of next-gen technology solutions at scale.
Specifically, Jio’s connectivity infrastructure will promote the adoption of
the Microsoft Azure cloud platform and technology stack to its enterprise
customers. In addition, Jio will leverage the Microsoft Azure cloud
platform to develop innovative cloud solutions focused on the needs of
Indian businesses. Jio will also set up data centres in locations across India,
consisting of next-generation compute, storage and networking
capabilities, and Microsoft will deploy its Azure platform in these data
centres to support Jio’s offerings.
GLOBAL
PARTNERS
IN
LIST OF INVESTMENT RECEIVED IN JIO TILL DATE
JIO
Date
Investor
22-Apr
04-May
08-May
17-May
22-May
05-Jun
05-Jun
07-Jun
13-Jun
13-Jun
18-Jun
02-Jul
12-Jul
15-Jul
Facebook
Silver Lake
Vista Equity Partners
General Atlantic
KKR
Silver Lake
Mubadala
ADIA
TPG
L Catterton
PIF
Intel Capital
Qualcomm
Google
Amount
Stake in
Enterprise Value
(INR Crore) JPL (%)
(INR Lacs Crore)
43,-,-,-,-,-,-,-,-,-,-,-,-,737
7.73
NA
Page 16 of 50
PLATFORM
S
RESEARCH REPORT – JIO PLATFORMS
NETWORK BUILT FOR A BILLION INDIANS, WITH WORLD-CLASS
NETWORK ARCHITECTURE
Jio’s all-IP data network is built on the 4G-LTE technology. The network
built as a mobile video network carries more than 4 Exabytes of data
monthly and is future ready to transition to 5G and beyond.
Network capacity too is being augmented by adding incremental sites, WiFi access points, small cells and expanding fiber backhaul. To further
improve the network experience, advanced features such as Software
Defined Networking (SDN) and Network Function Virtualization (NFV)
have been incorporated, along with significant in- house data center
capacity and investments into Content Distribution Network (CDN).
Even with 387.5 million subscribers having per capita voice usage of 771
minutes per month and data usage of 11.3 GB per month, data speed
remains the highest while network latency and call drop rates remain the
lowest among all networks across the country. The entire scale-up of Jio
has come alongside sustained network performance underlining its quality
and capacity.
PROGRESS ON TOWER AND FIBER INVIT
Jio’s passive infrastructure, which includes 1,75,000 towers and 1.1
million route kilometers for fiber in full scope, has already been transferred
through a Scheme as of March 31, 2019, held through two separate
Infrastructure Investment Trusts (InvIT). During the year, Reliance has
signed a binding agreement with Brookfield Infrastructure Partners LP and
its institutional partners for investment in the units to be issued by the
Tower InvIT.
Page 17 of 50
JIO
PLATFORM
S
STRENGTH
S
RESEARCH REPORT – JIO PLATFORMS
FIXED MOBILE CONVERGENCE
In the next phase of the connectivity rollout, Jio will offer state-of-the-art
wireline services across FTTH and Enterprises.
The core and aggregation layers of the Jio network have been converged
and 5G-ready from the time of inception. This will allow Jio to offer
services across the fixed mobile connectivity layers, leading to not just
enhanced experience but also efficient pricing.
LIBERALISED SPECTRUM ACROSS THREE BANDS
The strength of Jio network is in the fact that the entire 1,108 MHz of panIndia spectrum holding across the three bands (800 MHz, 1800 MHz and
2300 MHz) is deployed towards 4G-LTE. Each of the sites on the network
radiates all three bands. The average life of the spectrum is 13 years with
all spectrum liberalized, which can be used to roll out any future
technology.
PIONEERING VOICE TECHNOLOGIES AT SCALE – FROM
VOLTE TO VOWI-FI
Jio is the first network globally to roll out VoLTE at scale. In fact, Jio is
the largest VoLTE network carrying 9 billion minutes per day. To further
improve customer experience, Jio also launched nationwide voice and
video over Wi-Fi services. With this, customers can use any Wi-Fi network
for Jio Wi-Fi calling. The voice and video calls seamlessly switch over
between VoLTE and Wi-Fi to provide an enhanced voice/video-calling
experience.
Page 18 of 50
JIO
PLATFORM
S
STRENGTH
S
RESEARCH REPORT – JIO PLATFORMS
UNDERSEA CABLE FOR DIGITAL CONNECTIVITY
Jio has been actively creating a multi terabit capacity international fiber
network. Jio, with its partners, is a part of two undersea cable network
consortiums:
BBG (Bay of Bengal Gateway), a state-of-the-art 8,100 km undersea
cable system providing direct connectivity to South East Asia and
Middle East, then onward to Europe, Africa and Far East. This
strategically important undersea cable facility has a landing facility
in Chennai.
AAE-1 (Asia Africa Europe) stretches over 25,000 km from
Marseille, France to Hong Kong. This is the longest 100 Gbps
undersea cable system with 21 landing stations across Europe and
Asia. In India, it has a landing station in Mumbai.
DISTRIBUTION ACROSS EVERY NOOK AND CORNER OF THE
COUNTRY
Reliance Retail works as the Master Distributor for Jio connectivity
services Jio has a pan-India distribution channel with over 1 million
retailers for customer acquisition and selling recharges ensuring every
Indian home is within 20 kms of a Jio Point. In addition to this, services
are also sold through the MyJio application, the best-in-class full-service
(prepaid and post-paid payments, loyalty coupons, troubleshooting,
addition or deletion of services) self-care application. MyJio’s success is
evident from a large portion of smartphone and JioFiber customers
recharging and selecting their subscription plans through the application.
Page 19 of 50
JIO
PLATFORM
S
STRENGTH
S
RESEARCH REPORT – JIO PLATFORMS
INNOVATION ACROSS NETWORKS AND PLATFORMS
Right since its inception, Jio has strived to lead innovation in India across
network technology, platforms and consumer services. Till date, Jio has
filed 134 patents for the pioneering initiatives it has undertaken, of which
29 have been granted. In FY 2019-20 alone, Jio filed for 31 patents and
was granted 10. These patents span across devices, network, cloud, digital
media, branding and customer experience. Jio’s patents cover areas of
cutting-edge technology, including IoT, 5G, video bots, Blockchain, NFV
and Evolved Multimedia Broadcast Multicast Services (eMBMS).
INNOVATION
AND
PORTFOLIO
SUITE OF DIGITAL APPS
Jio has taken a practical approach to technology and a platform approach
to bring networks, technology, services and experience under a single
umbrella. This has made the time to market for Jio’s solutions the lowest
across any technology firms, allowing it to be nimbler and more responsive
to customer and market needs. Across technologies and customer needs,
Jio endeavors to create scalable and globally exportable platforms.
Jio network’s ability to seamlessly carry multimedia content has allowed
it to enrich customer experience through a rich suite of applications and
tools that encompass entertainment, news, information, commerce and
self-service. Jio’s rich suite of digital applications have won multiple
accolades and continue to have the best- in-class customer engagement
metrics in their respective categories. These include JioTV (680+ channels
of live and catch-up TV, across 15 languages and 10
Page 20 of 50
OF
APPLICATION
RESEARCH REPORT – JIO PLATFORMS
genres), JioCinema (video on demand, 10,000+ movies, 1,20,000+
episodes, 60,000+ music videos), JioMoney, JioNews (190+ live channels,
800+ magazines, 10+ languages, JioSaavn (India #1 OTT music app with
55+ million tracks across 16 languages, unique Artist Originals
Programme), JioChat, JioHealthHub, among others. MyJio app with
digital self-service and e-care capability is a cornerstone of Jio’s digital
proposition for its customers.
Jio has done deep integration of JioSaavn, JioCinema and JioCloud, among
others, into MyJio to provide a single-window access to all apps. Digital
services to the customer would expand from the current media and
entertainment to also include education, commerce, healthcare, agriculture
and e-governance.
INNOVATION
AND
PORTFOLIO
OF
INVESTMENTS IN NEXT- GENERATION TECHNOLOGY
CAPABILITIES
With technology capability in its core DNA, Jio has invested in
technologies ranging across Big Data, Blockchain, Mixed Reality, edge
compute, IoT, computer vision, secure identity, AI/ML, super compute,
robotics and IaaS/PaaS. Some of these are already integrated and find use
cases in the existing offerings, while others would drive launch of Jio’s
next set of digital offerings to the consumers.
India has a rich and fast-growing ecosystem of entrepreneurs who are
using technology to solve customer problems across the strata of
population. Reliance is playing an important role in developing this
ecosystem through investments and collaboration.
Page 21 of 50
APPLICATION
RESEARCH REPORT – JIO PLATFORMS
Over the course of time, Reliance has invested in companies such as
Embibe (AI-based education platform), Karexpert (digital healthcare
platform), Tesseract (AR/ VR capabilities), Reverie (AI for speech and
language recognition), SankhyaSutra (computing, analytics and simulation
tools), Netradyne (AI-based fleet management), Easygov (G2C solutions),
Haptik (AI/ML for speech and language recognition), Saavn (online music
platform), NewJ (content curator), Radisys (digital initiative for
communications and networks) and Asteria (drone technology).
These investments, along with Reliance’s in- house developed technology
capabilities, will be a part of Jio Platforms Limited and have been carefully
selected to fit into the Reliance digital ecosystem to enhance and keep its
offering across mobility, homes and enterprises future ready.
INNOVATION
AND
PORTFOLIO
OF
APPLICATION
Page 22 of 50
RESEARCH REPORT – JIO PLATFORMS
FINANCIAL METRICS
Valuation of Jio’s telecom business at an EV of INR 7.1trn
Particulars
EBITDA
EV/EBITDA (x)
EV
Debt
Equity Value
Value Per Share
(INRb)
499
15
7,-,132
1,125
Key Matrics - JIO
FY 18
FY 19
FY 20
FY 21E
FY 22E
186.6
306.7
385
440
480
ARPU (INR)
144
131
128
135
145
Net Revenues (INR bn)
202
388
543
745
872
-
92.7
39.9
37.2
17.0
67
151
216
347
499
33.4
38.9
39.7
46.6
54.6
Closing Subs (mn)
YoY growth (%)
EBIDTA (INR bn)
EBIDTA Margin (%)
SUBSCRIBER ADD AND ARPU IMPROVEMENT
Within 40 months from its commercial launch in Sep 2016 with 370mn
subscribers, Jio is the largest telecom service provider in India by revenue
market share. Jio to continue subscriber addition, though at a slower rate
compared to the past, with incremental 55mn subs in FY21E as it continues
to offer over 35% cheaper tariffs vs competitors and better coverage.
ARPU is expected to improve at a CAGR of 7.8% over FY20-FY24E on
the back of tariff hikes across the industry as competitors are faced with
increased regulatory costs.
Page 23 of 50
RESEARCH REPORT – JIO PLATFORMS
TOTAL SUBSCRIBERS AND ACTIVE SUBSCRIBERS
SUBSCRIBERS
Total Subscribers
Active Subscribers
400
355
350
AND
307
300
280
252
-
100
REVENUE
370
331
72
50 63
139
107
123
93
187
160
160
133
215
178
258
278
290
305
234
208
0
SHARE
Adjusted Revenue Market Share trend
Page 24 of 50
Bharti India
-
-
-
-
-
-
0
Voda-Idea
-
18.3
20.8
10
26.8
44.8
20
41.8
40
30
-
-
0
29
38.9
0
36.7
47.2
30.4
37.7
49.3
40.1
35.3
47.8
33.7
34.3
45.2
0
0
33.4
44.2
0
33.8
50
45.4
60
30.6
70
0
80
0
0
0
90
0
100
Jio
RESEARCH REPORT – JIO PLATFORMS
Jio’s revenue market share across circles
Since its launch in September 2016, Jio’s ramp-up of its mobile
business has been impressive and significantly ahead of market
expectations. Its entry precipitated a raft of operator exits and a rapid
industry consolidation. Over the past 3 years, Jio has gained 31.0%
share of active subscribers and 34.5% revenue market share.
JIO
MARKET
SHARE
CIRCLEWISE
The Indian telecoms market is divided into circles for purposes of
licensing and spectrum allocation. There are four categories of
circles: metros and categories A, B and C- the nomenclature largely
reflecting the economic potential of the market.
Jio’s circle wise performance correlates well with the level of
urbanization of the market. Jio’s outperformance has consistently
been higher for rural dominated markets such as Himachal Pradesh,
Bihar, UP, etc. and lower for metro markets (Delhi/Mumbai) and
urbanized states like TN, Karnataka, Maharashtra, etc. Jio’s greatest
success seems to have come from attracting affluent subscribers in
smaller markets. But lately it has narrowed the gap even in markets
with higher share of urban subscribers.
Page 25 of 50
RESEARCH REPORT – JIO PLATFORMS
AVERAGE
REVENUE
PER USER
TREND
After two years of YoY decline expecting ARPU growth from FY21E
Jio’s aggressive launch offers adversely impacted ARPUs for its
incumbent peers. For instance, Bharti’s ARPU fell from a level of
INR 198 pre Jio in 4QFY15 to a trough of INR 135 in 3QFY20.
Voda-Idea’s ARPU’s similarly fell from INR 184 pre Jio in
4QFY15 to a trough of INR 109 in 3QFY20.
Jio’s ARPUs is expected to rise from INR 131 in FY19 to INR 145
in FY22E driven by the IUC related tariff increase and the move
across the industry to raise ARPUs because of weaker finances of
the competitors and increased regulatory costs. With rising ARPUs,
operational leverage is expects to drive EBITDA CAGR of 7.8%
over FY20 – FY24E.
Page 26 of 50
RESEARCH REPORT – JIO PLATFORMS
Pricing strategy: Transitioning from a tool for faster customer
acquisition to monetization
JIO
PRICING
Jio has consistently maintained that it will ensure its pricing will be
competitive compared to the incumbents. With its current tariff plans Jio
is still ~9/7% cheaper compared to its competitors. With Jio being
consistently profitable despite such aggressive pricing, no change in its
wildly successful pricing strategy as a key weapon in its quest to garner
subscribers is expected. Further, Jio is expected to turn its focus to
monetizing once it acquires close to 500mn wireless subscribers by end of
FY22E.
Jio’s Tariffs Are at a Significant Discount to Competitors’
STRATEGY
Operator
Tariff
(INR)
Days
Data
(GB)
JIO
199
28
42
Airtel
219
28
28
VodaIdea
JIO
219
28
28
555
84
126
Airtel
598
84
126
VodaIdea
599
84
252
Page 27 of 50
Tariff/day
(INR/day)
Additional on
offer
7.1 Unlimited
calls
7.8 Unlimited
calls and 100
SMS
Jio's
Discount vs
peers
-9.1
7.8 Unlimited
calls
6.6 Unlimited
calls
7.1 Unlimited
calls and 100
SMS
-9.1
7.1 Unlimited
calls
-7.3
-7.2
RESEARCH REPORT – JIO PLATFORMS
Fibre broadband: the next revenue driver
FIBRE
The current broadband market is significantly underserved – there are only
19mn wired broadband connections compared to total urban households of
over 80mn. Jio’s extensive fibre network and access to Den and
Hathaway’s customers should allow Jio to address 30mn households. Jio
is targeting 20 million homes over the next 3 years.
BROADBAND:
Active DTH and Wired Broadband Subscribers (mn)
GAP
Active DTH subs
-
100
80
TO
60
Wired broadband subs
-
40
20
BE
-
0
FILLED
Additional revenue streams: Incremental Revenue opportunities
Cloud
RIL has entered into a partnership with Microsoft for its cloud
infrastructure Azure which includes RIL setting up the data centres. At its
AGM, RIL announced that it could offer these services (Azure, Azure AI,
Office 360), including connectivity, to the SMEs at about
Page 28 of 50
RESEARCH REPORT – JIO PLATFORMS
INR 1500/month, almost one tenth of what it would cost a SME for
equivalent services.
Narrow Band IoT (NB IoT)
ADDITIONAL
Jio estimates about 2 billion connected IOT devices in the country by
FY23. It intends to target 50% market share in NB-IoT which translates to
an INR 200bn revenue opportunity.
The strength of ~500mn subscribers
REVENUE
STREAMS
Jio’s strategy in it’s over 3 years since launch has been to acquire
subscribers through aggressive pricing and improved content and /
customer experience. It has amassed industry leading 370mn
subscribers in short span of 40 months. It has never been shy in
articulating its ambition to garner 450mn-500mn (~50% market
share). A strong subscriber base also affords Jio a stronger
bargaining position while negotiating with content providers as well
as opens up additional revenue generating opportunities such as
targeted advertisements using data analytics, eventual content
monetization, etc.
Content is likely to emerge as the next lever for subscriber
acquisition and retention, as has been the case in many markets that
have seen an explosion in data consumption. Jio could consider
reviving its Jio Prime programme in order to monetize its content.
Jio had initially flirted with content monetization through its Prime
subscription. We do not rule out reintroduction of a similar
monetization strategy once it crosses 450mn subs.
Page 29 of 50
RESEARCH REPORT – JIO PLATFORMS
RJIO KPI Comparison
Key Operating Metrics
1QFY20
4QFY20
Subscriber base (mn)
331.3
Net subs adds
Gross sub adds
Churn per mth (%)
ARPU (INR/sub/month)
ANALYSIS
OF
Total wireless Data traffic (cr
GB)
Wireless Data traffic per sub
(GB/mth)
Voice on Network (b min)
Voice consumption per sub
(min/mth)
YoY%
387.5
1QFY
21
398.3
1QFY21E
20.2
QoQ
%
2.8
372.5
Var
(%)
6.9
24.6
17.5
10.8
-56.1
-38.3
-15
-172
34.2
23.9
15.1
-55.9
-36.8
na
na
1.00%
0.60%
0.50%
-
-
na
na
122
131
140
15
7.4
134
4.8
1,090
1,284
1,420
30.3
10.6
1,824
-22.2
11.4
11.3
12
5.8
6.6
16
-24.7
786
876
889
13.2
1.5
879
1.2
821
771
755
-8.1
-2.2
771
-2.2
SOURCE: Telecom Regulatory Authority Of India
ARPU Reconciliation
Subscriber category
FINANCIAL
Smartphone Subs
PERFORMANCE
Jiophone Subs
Prime Subscription
Total
Revenue
Average
1QFY21 ARPU
4QFY20 ARPU
(INR b)
Subscribers (m)
(INR)
(INR)
1,33,175
278.6
159
144
10.70%
28,776
114.3
84
84
0.00%
3,421
138.2
8
8
0.00%
1,65,372
392.9
140
131
7.40%
AND
Growth (%)
SOURCE: Telecom Regulatory Authority Of India
Subscribers working
Subscribers gr. drivers
FORECASTING
Subscribers
Net Adds
Churn
Subs churn
Gross Subscriber adds
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
331.3
355.2
370
387.5
398.3
24.6
23.9
14.8
17.5
10.8
0.97%
0.74%
2.10%
0.57%
0.46%
9.64
7.89
22.3
6.4
4.3
34.24
31.79
37.1
23.9
15.1
23
23
18
7
5
11.7
9.3
19.1
16.5
10
Smartphone adds
Jiophone Subs adds
SOURCE: Telecom Regulatory Authority Of India
Page 30 of 50
RESEARCH REPORT – JIO PLATFORMS
Quarterly Earning
Model
(INR B)
Y/E March
FY21
FY20
FY20
FY21
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
Net Revenue
117
131
140
148
166
180
194
206
543
YoY Change (%)
NA
42.1
28.3
33.6
41.9
37.4
38.6
39.2
39.9
Total Expenditure
70
80
84
87
96
101
105
97
EBITDA
47
51
56
62
70
79
89
Margins (%)
40
39.1
40
41.6
42.3
44
Depreciation
17
18
18
22
27
Finance Cost
17
19
20
11
Other Income
0
0
0
PBT
14
15
Tax
5
35%
Rate (%)
PAT
Variance
1QFY21E
(%)
745
153
37.2
30.7
327
398
88
8.9
109
216
347
65
7.9
45.8
53
39.7
46.6
42.5
-22
30
32
34
74
124
23
18.4
12
12
12
12
66
47
7
74
0
3
1
1
1
1
5
1
153.8
19
29
34
38
46
64
76
182
36
-6.6
5
5
6
9
10
12
16
21
46
10
35%
27%
20%
25%
25%
25%
25%
27%
25%
27%
9
10
14
23
25
29
34
48
56
136
26
Margins (%)
7.6
7.5
9.7
15.7
15.2
15.9
17.6
23.1
10.2
18.2
17
YoY Change (%)
NA
NA
0.6
1.8
NA
NA
1.5
1
88%
144%
NA
8.5
-4.4
QoQ Performance
(INR b)
1QFY20
4QFY20
1QFY21
YoY%
QoQ%
1QFY21E
Var (%)
117
148
166
41.9
12.2
153
8.5
Operating expenses
70
87
96
37.1
10.3
88
9.1
EBITDA
47
62
70
48.9
12.9
65
7.7
EBITDA margin (%)
40
41.6
42.3
232bps
68bps
42.5
-22bps
Depreciation and amortization
17
22
27
58.8
22.7
23
17.4
EBIT
30
40
43
43.33
7.5
42
2.4
25.8
27
25.8
-3bps
-124bps
27.4
-160bps
Finance Costs
17
11
12
-29.4
9.1
7
71.4
Other income
0
0
3
1625
961.5
1
200.0
14
29
34
142.9
17.2
36
-5.6
5
6
9
80
50.0
10
-10.0
34.9
19.6
25.3
-958bps
571bps
27.1
-177bps
Profit after Tax
9
23
25
177.8
8.7
26
-3.8
Adjusted Profit after Tax
9
23
25
177.8
8.7
26
-3.8
Revenue from operations
EBIT margin (%)
Profit before Tax
Tax
Tax rate (%)
Source: Company Data I
Page 31 of 50
RESEARCH REPORT – JIO PLATFORMS
RJIO EBIDTA Margin trend
0
2
4
6
8
180
38.2
160
37.8
38.8
38.7
39
37.2
40
10
39.1
40
41.6
12
42.3
14
45
40
140
35
120
100
30
23.5
25
80
60
40
61
69
71
81
92
109
117
111
131
140
148
166
20
15
10
20
5
0
0
Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21
Revenue
EBIDTA margin'
RJIO VOICE TRAFFIC TREND
-
30%
27%
20%
25%
21%
19%
19%
20%
14%
15%
9%
10%
6%
3%
246
311
372
449
534
634
724
786
813
2%
826
876
1%
889
5%
0%
Voice traffic
QoQ Growth
Page 32 of 50
RESEARCH REPORT – JIO PLATFORMS
RJIO DATA TRAFFIC TREND
16
30%
27%
14
25%
12
20%
20%
17%
10
14%
8
14%
12%
11%
11%
10%
6
10%
6%
4
5%
2
3.8
4.3
5
6.4
7.7
8.6
9.6
10.9
12
0%
12.1
12.8
14.2
0
0%
Data traffic
QoQ Growth
RJIO NET DEBT EBIDTA
Net debt/EBIDTA
25
15%
21.1
20
15
9.2
10
5
1.7
0
-0.2
FY21E
FY22E
0
FY18
FY19
FY20
-5
Page 33 of 50
RESEARCH REPORT – JIO PLATFORMS
Consolidated - Income Statement
Y/E March
(INR b)
FY18
FY19
FY20
FY21E
FY22E
Total Income from Operations
202
388
543
745
872
Change (%)
NA
92.7
39.9
37.2
17
Total Expenditure
134
237
327
398
396
% of Sales
66.6
61.1
60.3
53.4
45.4
67
151
216
347
476
33.4
38.9
39.7
46.6
54.6
Depreciation
36
64
74
124
114
EBIT
32
87
142
223
362
Int. and Finance Charges
20
41
66
47
47
0
0
1
5
21
11
46
76
182
336
4
16
21
46
85
34.8
34.9
27.2
25.3
25.3
Reported PAT
7
30
56
136
251
Adjusted PAT
7
30
56
136
251
Change (%)
LP
310
87.7
143.8
85
Margin (%)
3.6
7.6
10.2
18.2
28.8
EBITDA
Margin (%)
Other Income
PBT after EO Exp.
Total Tax
Tax Rate (%)
Source: Company
Page 34 of 50
RESEARCH REPORT – JIO PLATFORMS
Consolidated - Balance Sheet
Y/E March
(INR b)
FY18
FY19
FY20
FY21E
FY22E
Equity Share Capital
450
450
450
450
450
Total Reserves
579
-46
1,260
1,625
1,876
Net Worth
1,029
404
1,710
2,075
2,326
Total Loans
1,438
1,399
470
470
470
Capital Employed
2,468
1,803
2,179
2,545
2,796
Gross Block
1,595
1,444
1,772
2,274
2,492
40
104
138
301
415
1,555
1,340
1,634
1,973
2,077
700
346
213
0
0
10
13
25
11
11
272
259
545
856
1,013
Account Receivables
9
7
16
41
48
Cash and Bank Balance
7
4
75
453
550
256
247
454
362
415
Curr. Liability & Prov.
70
155
238
296
306
Account Payables
31
33
47
49
49
Other Current Liabilities
34
121
190
232
240
5
1
1
14
17
202
104
308
561
707
2,468
1,803
2,179
2,545
2,796
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Loans and Advances
Provisions
Net Current Assets
Appl. of Funds
Source: Company Data
Page 35 of 50
RESEARCH REPORT – JIO PLATFORMS
Ratios
Y/E March
FY18
FY19
FY20
FY21E
FY22E
0.2
0.7
1.2
3
5.6
Cash EPS
1
2.1
2.9
5.8
8.1
BV/Share
22.9
9
38
46.1
51.7
DPS
0
0
0
0
0
Payout (%)
0
0
0
0
0
-7.2
-8.3
-7.6
3.9
2.7
RoE
0.8
4.1
5.3
7.2
11.4
RoCE
0.9
2.7
5.2
7.2
10.7
RoIC
2.1
3.5
6.2
8.5
12.5
Fixed Asset Turnover (x)
0.1
0.3
0.3
0.3
0.3
Asset Turnover (x)
0.1
0.2
0.2
0.3
0.3
Debtor (Days)
17
7
11
20
20
Creditor (Days)
56
31
32
24
20
Current Ratio
3.9
1.7
2.3
2.9
3.3
Interest Cover Ratio
1.5
2.1
2.1
4.8
7.7
Net Debt/Equity
1.4
3.4
0.2
0
0
Basic (INR)
EPS
Valuation (x)
FCF per share
Return Ratios (%)
Working Capital Ratios
Leverage Ratio (x)
Source: Company Data
Page 36 of 50
RESEARCH REPORT – JIO PLATFORMS
Consolidated - Cash Flow Statement
Y/E March
(INR b)
FY18
FY19
FY20
FY21E
FY22E
OP/(Loss) before Tax
11
46
76
182
336
Depreciation
36
64
74
124
114
Interest & Finance Charges
20
41
66
47
47
Direct Taxes Paid
-2
-10
-12
-46
-85
(Inc)/Dec in WC
-29
-75
-37
110
-50
36
66
168
416
362
0
0
-2
10
-21
36
67
166
427
341
(Inc)/Dec in FA
-358
-438
-508
-250
-218
Free Cash Flow
-322
-372
-342
177
123
-1
0
-9
14
0
0
0
-160
9
25
CF from Investments
-359
-438
-677
-227
-193
Issue of Eq/Pref.Shares
313
0
1,250
230
0
Inc/(Dec) in Debt
102
460
-538
0
0
Interest Paid
-85
-92
-103
-47
-47
Dividend Paid
0
0
0
0
0
Others
0
0
-20
0
0
330
368
588
183
-47
Inc/Dec of Cash
7
-3
75
383
101
Opening Balance
0
7
0
71
449
Closing Balance
7
4
75
453
550
CF from Operations
Others
CF from Operating incl EO
(Pur)/Sale of Investments
Others
CF from Fin. Activity
Source: Company Data
Page 37 of 50
RESEARCH REPORT – JIO PLATFORMS
JIO’S MASSIVE INVESTMENT SIGNALS A CONSTRUCTIVE
VIEW OF INDIAN TELECOM SECTOR
Capital Employed (USD bn-
30
28.9
JIO
-
Voda-Idea
Bharti India
Jio
CAPITAL
INVESTMENT
At the end of 3QFY20, Jio reported total investment of USD 50bn in its
telecom/digital services business. This is significantly higher compared to
the investments made by the incumbents likely indicating a constructive
outlook on eventual returns in the business once the industry stabilizes. To
its credit, over a short span of 3 years since launch Jio has influenced
consumer behavior by driving a dramatic increase in data consumption by
offering better content, network reach and significantly improved
consumer experience. Jio has expanded the market in terms of potential
revenue streams for telecom operators in its quest to graduate to a digital
services company from a pure telco.
Page 38 of 50
RESEARCH REPORT – JIO PLATFORMS
RJIO DIGITAL PLANS FOR INDIA
India digital society plan: There are 4 key elements of digital society such
as (a) connectivity, (b) business platform, (c) consumer platform, and (d)
disruptive technologies.
WHAT
FUTURE
HOLDs
Connectivity: RJio has created pan-India 4G LTE network for data
and the largest voice network on VoLTE globally. Additionally, it
has launched narrow band LTE with minimal investments.
Business platform: It has sizeable mass of subscribers – both retail
and business customers. Management believes that wireline and
wireless network can be integrated to provide better services.
Consumer platform: RJio is looking to provide high quality/value
solutions to its customers and has already prepared media solutions
for this purpose. It is now exploring the commerce sector. Further,
management is looking to extend these solutions to healthcare, IoT,
etc. For instance, its Jio TV+ can be used across platforms with a
single login, thus, offering inter-operability.
Disruptive technology: Cloud services, automation products and
natural languages’ processing could be new technologies.
5G/Jiophone capabilities
Next frontier: The world has begun increasing the pace of 5G
adoption for incremental capacity and to augment other digital
services. Management believes that India can lead the way forward
in this segment.
Internally built capability: Unlike partnering with others for 4G, the
company is preparing the 5G stack internally. Further, it is looking
to deploy the technology initially in India and could
Page 39 of 50
RESEARCH REPORT – JIO PLATFORMS
later scale it to sell globally.
Cloud native 5G capabilities: RJio has end-to-end suite of 5G
technologies with cloud enablement.
Jiophone production: RJio has gained good expertise in hardware
and is now planning to develop and produce Jiophone internally.
WHAT
FUTURE
HOLDs
New products and services
Jiomeet: The app has end-to-end encryption and supports unlimited
participants with cloud-ready architecture. It has gained a large set
of customers in a short period of time since its launch. It is a highly
scalable and a feature-rich product.
Jiohaptik: This is an AI-based automated chat-box and was used in
‘MyGov Corona Helpdesk’. It has been used by >30m citizens over
the last 3 months.
EasyGov: This app provides various schemes of central and state
government on a single platform. It contains information of 350
central/state government welfare schemes.
Jio e-learning: RJio has launched 65 educational channels on JioTV
with both national and state content.
Jiofiber: The Company is aggressively rolling out last mile fiber and
has set up capacity/home pass for faster rollout. Further, it is
creating a platform to ramp up capacity. These would enable
integration of home IOT, smart home solutions, AI-based
automation and IOT devices like energy metering, smart solutions
and would be a key differentiator.
Page 40 of 50
RESEARCH REPORT – JIO PLATFORMS
JIO PLATFORMS PRODUCTS
Page 41 of 50
RESEARCH REPORT – JIO PLATFORMS
TELECOM SECTOR INDIA – SWOT ANALYSIS
Strengths
The mobile market still has room for further growth, particularly in rural
regions, with a healthy degree of competition.
The mobile market hosts several strategic investors, including Vodafone,
Bharti and Reliance Industries.
Demand for mobile value-added services is strong and expected to grow.
Wireline market growth driven by demand for broadband and TV services
Relaxing spectrum cap rules in India is positive for the ongoing wave of
consolidation within the industry.
Weakness
Ongoing dispute regarding the definition of adjusted gross revenues (AGRs)
highlights the government's reliance on the sector for revenues, and will
continue to impede investor confidence.
Mobile market is still highly skewed towards prepaid users, with a significant
portion considered to be inactive; this contributes to declining mobile ARPUs.
Aggressive competition also undermining growth in ARPUs.
Regulatory framework has been under intense spotlight amid corruption and
mismanagement scandals, affecting investor confidence.
Wireline market is dominated by Bharat Sanchar Nigam Ltd and Mahanagar
Telephone Nigam Ltd.
Broadband growth is limited by dependence on xDSL, as well as other ageing
copper-based technologies.
Page 42 of 50
RESEARCH REPORT – JIO PLATFORMS
OPPORTUNITIES
Leading operators are actively deploying multimedia content services,
providing opportunities for content providers. In addition, aggressive price cuts
for 2G mobile data have encouraged more consumers to use premium nonvoice services.
Competition levels in the mobile market arena remain fierce.
With a large number of small operators in the market, there is considerable
scope for industry consolidation.
Launch of IPTV services by major operators could stimulate demand for
broadband services.
THREATS
Network capacity, particularly in the mobile market, not keeping pace with
demand, leading to poor service quality.
Fluid regulatory and business environment to impede future investments.
Fixed-line sector may decline at a more rapid rate than envisaged, with
potentially negative consequences for ADSL growth.
Broadband growth is limited by dependence on xDSL, as well as other ageing
copper-based technologies.
Page 43 of 50
RESEARCH REPORT – JIO PLATFORMS
INDUSTRY FORECAST
Competitive pressures in the Indian telecoms market to stabilize in 2021, most notably
in the mobile arena, where operators have been grappling with consecutive quarters of
revenue and margin erosion. Operators are now focused on maximizing revenue from
high-value subscribers, while also looking at expanding coverage to rural areas for
organic subscription growth. 3G continues its rapid decline as subscribers latch on to
LTE services, enabled through the proliferation of low-cost smartphones and feature
phones. Short-term pressures exist largely in the October 2019 Supreme Court ruling
that operators have to pay an additional INR920bn (USD12.8bn) in license fees to the
government. The overbearing regulation and scrutiny from the government, coupled
with persistent market pressures, will weigh on the short-term profitability for
operators.
Significant deviations are not expected in the growth trajectory in both the mobile and fixed
markets. By the end of 2029, we expect mobile subscriptions to reach 1.36bn, suggesting
mobile penetration of close to 90.9%. Operator efforts to repurpose spectrum to provide
4G services as well as a focus on low-cost 4G feature phones and smartphones underpins
our optimistic forecasts. Government-led manufacturing initiatives, namely 'Make in India'
could further improve the affordability of handsets.
The wire line voice telephony market continues to decline due to mobile substitution and
the closure of ageing WLL networks. This hampers the development of the wire line
broadband market, although metropolitan areas are benefiting from FTTx roll-out,
supported by value-added services such as VoIP and IPTV. Voice accesses will number
17.0mn by the end of 2029, down considerably from the 21.0mn connections registered at
the end of 2019.
In the near term, the expansion of wire line broadband networks is hampered by lack of
investment in infrastructure and low consumer discretionary spending power. On the
flipside, we see the introduction of fiber services, and a keen focus on bundling from the
private operators will likely reinvigorate growth in the market. The dedicated mobile
broadband market will see negative growth as consumers increasingly move toward voiceand-data plans, used on smartphones. By the end of 2029, 56.98mn broadband
subscriptions are expected, of which 27.29mn will be fixed connections.
Page 44 of 50
RESEARCH REPORT – JIO PLATFORMS
Source: TRAI
The mobile market continues to grow at a steady pace, based on data from key operators as well
as industry bodies, such as the Telecoms Regulatory Authority of India (TRAI) and the Cellular
Operators Association of India. As of December 2019, there were over 1.15bn mobile
subscriptions, and we estimate that this will track upwards to over 1.36bn by the end of 2029.
There will likely by variations in the numbers over the years, as multi-SIM ownership will
inevitably trigger rounds of SIM deactivations, as operators seek to weed out zero-value
subscriptions from their user base.
Page 45 of 50
RESEARCH REPORT – JIO PLATFORMS
Source: TRAI
The wireline voice market is expected to continue contracting as subscribers forsake
expensive landlines for very cheap mobile services. Price competition in the mobile
broadband arena is accentuating this trend, increasing the value and attractiveness of
mobile versus wireline. Besides the mobile substitution trend, the dominance of underfinanced utilities BSNL and MTNL in the wireline sector will continue to hamper
development. Few operators are willing to challenge the incumbents, despite the poor
quality of service they provide.
Page 46 of 50
RESEARCH REPORT – JIO PLATFORMS
Indicator
2018
2019
2020
2021f
2022f
2023f
11,75,997
11,51,437
11,76,769
12,01,481
12,25,511
12,48,795
3G subscriptions ('000)
97,646
88,300
77,439
66,985
56,133
45,524
4G subscriptions ('000)
4,02,304
5,53,890
6,89,593
7,97,859
8,73,656
9,36,559
Dedicated mobile
broadband subscriptions
('000)
27,700
25,000
25,275
25,326
25,655
26,040
Monthly blended ARPU,
INR
72
75
77
80
83
87
Total fixed voice
subscribers ('000)
21,868
21,005
20,563
20,152
19,709
19,256
Total broadband
subscriptions ('000)
45,870
44,140
45,238
46,127
47,288
48,495
Fixed broadband
subscriptions ('000)
18,170
19,140
19,963
20,802
21,634
22,456
Total mobile phone
subscribers ('000)
Source: TRAI
Mobile Subscribers ('000)
Q118
Q218
Q318
Q418
Q119
Q219
Q319
Q419
Total
11,83,410
11,46,490
11,69,290
11,75,997
11,61,812
11,65,460
11,73,750
11,51,437
Prepaid
11,30,157
10,93,751
11,14,918
11,21,313
11,07,787
11,10,683
11,18,584
10,97,320
53,253
52,739
54,372
54,684
54,024
54,777
55,166
54,118
76
69
73
73
71
74
78
na
584
608
627
667
692
701
691
na
Wireline
22,810
22,395
22,113
21,868
21,700
21,170
21,490
21,005
Fixed
17,950
17,900
17,990
18,170
18,420
18,420
19,010
19,140
DTH
67,530
69,370
69,450
70,490
72,440
54,360
69,300
na
Gross Revenue
6,21,983
5,84,011
5,78,272
5,89,910
5,84,140
6,15,350
5,99,920
na
Adjusted Gross Revenue
3,56,972
3,65,525
3,61,424
3,50,540
3,59,320
3,91,240
3,73,380
na
Post-paid
Mobile Usage
Monthly Blended ARPU
(INR)
Monthly MOU (GSM,
min)
Wireline/Broadband/PayTV Subscribers ('000)
Financials (INRmn)
Source: TRAI
Page 47 of 50
RESEARCH REPORT – JIO PLATFORMS
RECOMMENDATION
VALUATION
EV/EBIDTA – INR 7.1 trillion
Relative Valuation – INR 5.16 trillion
Weighing both the values equally, we recommend the Enterprise Value of INR 6.13 trillion.
We expect the significant implementation of 5G infrastructure in India before March 2022.
Closely observing the share prices of Telecom Infrastructure Companies
involved in 5G rollout in Developed countries, we have observed that their
stock prices have plunged by ~ 25% post 5G roll-out.
Stock prices of China Towers & ATC over the past 2 years:
American Tower Corp-
200
100
Aug18
Sep18
Oct18
Dec18
Jan19
Feb19
Mar19
May19
Jun19
Jul19
Aug19
Sep19
Nov19
Dec19
Jan20
Feb20
0
Aug18
Sep18
Oct18
Nov18
Jan19
Feb19
Mar19
May19
Jun19
Jul19
Aug19
Sep19
Nov19
Dec19
Jan20
Feb20
300
China Towers
Page 48 of 50
RESEARCH REPORT – JIO PLATFORMS
RECOMMENDATION
Key Risks and threats
. No 2G/3G infrastructure, making it unable to directly service customers without 4G
handsets.
Many value-added services are still in beta stage, with possible instability a risk when
focusing heavily on volatile user base.
Consolidation amongst other operators could produce scale opportunities to undercut
Jio.
Call quality could continue to be an issue if operators continue to block Jio's access to
network infrastructure.
Key Strengths
Strong financial backing from Indian conglomerate Reliance Industries.
Biggest 4G LTE service provider, with coverage across all 22 telecom circles.
Has own line of low-priced 4G-capable LYF smartphones and 4G-featurephone
JioPhone.
Has own suite of value-added services, including JioTV, JioMusic, JioMoney.
The company snapped up RCom's tower assets, spectrum, fibre optic cable, and
media convergence nodes.
Page 49 of 50
RESEARCH REPORT – JIO PLATFORMS
SOURCE OF INFORMATION USED IN THIS
REPORT
1.
2.
3.
4.
5.
6.
Financial express & Economic times news articles of TMT sector
Deloitte Industry Report: Indian Telecom Market
Money control stock data for latest key ratios
Historical prices of various shares: Investing.com
Reliance India annual report
Telecom Regulatory Authority of India – Subscribers and telecom related data
Page 50 of 50
