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Business News/ Markets / Stock Markets/  How 5G spectrum win can drive Reliance Industries' shares
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How 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

Commuters are reflected on an advertisement of Reliance Industries' Jio telecoms unit, at a bus stop in Mumbai, India,  (REUTERS)Premium
Commuters are reflected on an advertisement of Reliance Industries' Jio telecoms unit, at a bus stop in Mumbai, India,  (REUTERS)

Reliance 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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ABOUT THE AUTHOR
Saloni Kothari
Covers markets, personal finance and economy for Livemint and currently hosts the 'Millionaire On A Budget' podcast
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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Published: 02 Aug 2022, 12:45 PM IST
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