BackHow 5G spectrum win can drive Reliance Industries' shares
Reliance Industries' Jio is likely to have first-mover advantage in 5G, as per Bank of America
PremiumReliance Jio emerged as the top spender in India's 5G spectrum auction received a record ₹1.5 lakh crore of bids. Reliance Industries' (RIL) telecom arm cornered nearly half of all the airwaves sold with a ₹88,078 crore bid.
“With Jio acquiring 700 MHz, we believe that the company is well placed to roll out standalone (SA) 5G. The advantage of SA 5G is that the company would be able to offer the true low-latency applications, such as slicing. This is difficult for its peers to offer given the lack of spectrum (telcos cannot roll this out on 4G bands)," said Bank of America (BofA) Securities.
While 5G SA still lags in terms of handsets, equipment and application, BofA finds Jio better placed than its peers to offer differentiated service. This could help the company to poach high-end customers from its competitors – likely increasing competition at the high end.
BofA's Buy rating on RIL shares comes with a target price of ₹2,820 apiece, which it believes could be triggered by higher refining & petrochem margins, strong subscriber additions at Jio. Though, it sees downside risks of negative cash flow for several years in its diversification, aggressive tariff discounts at Jio and higher capex.
The 5G services, which can provide data speeds about 10 times faster than 4G, is expected to be rolled out by October this year. Jio said that it will be ready for a pan-India rollout of 5G ‘in the shortest period of time’, without giving specific details.
Nomura believes that with by far the highest outlay, the quantum of incremental tariff hikes/5G premium is significantly higher for Reliance Jio as compared to Bharti Airtel and Vodafone Idea (Vi).
“5G tariff plans would be a key monitorable in the near term, and 5G premium (vs 4G) may provide the next leg of ARPU uptick for the telcos. We have Buy ratings on Bharti (BHARTI IN) and RIL (RIL IN, parent entity of Reliance Jio)," said analysts at Nomura with target price of ₹2,885 on Reliance Industries shares.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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