Piyush Gupta

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