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Reliance Jio - Spells out strong growth outlook!

ICICIdirect Research 24 Apr 2023 DISCLAIMER

What's Buzzing? 

Reliance Jio reported a muted topline performance in Q4FY23 while margins were better on lower network capex. The key highlight, however, was the strong growth outlook spelt out by the management in the communication business (wireless, broadband and enterprise). 


The subscriber addition traction remained healthy as the company added 6.4 million (mn) subs. We highlight that with a fourth consecutive positive subscriber addition quarter, the company is leading the subscriber addition and added 29.2 mn subscribers in FY23. The ARPU, however, was flattish QoQ at Rs 178.8 as the subscriber mix (higher data usage driven ARPU upgrades) was offset by lower number of days during the quarter. Nonetheless, we highlight that the company sees 5G as medium to long term enabler of higher data usage and APRU driver, going ahead. It highlighted that higher data usage under 5G will drive ARPU without even taking a tariff hike. Margins were better than expected owing to flattish network opex despite 5G rollout as the company may have capitalised on the interest expenses. Net debt (excluding capex creditors and lease liabilities) has increased from Rs 78503 crore in FY22 to Rs 151500 crore in FY23, largely led by 5G spectrum and launch led capex. Pan India 5G rollout target of December, 2023 is on track with Jio having launched 5G during Q3 and 5G coverage has expanded to 2300+ towns and cities, till date. The company indicated that 60,000+ sites have been deployed across 700 MHz and 3500 MHz bands with six sectors. 

Our Perspective 

The company continues to see 5G as a medium to long term enabler of higher data usage and ARPU driver along with its dedicated efforts to catch up on postpaid offerings (through new plans) where it currently lags incumbents. Furthermore, it highlighted its intent to aggressively expand broadband coverage (targeting 100 mn customer in two to three years vs. current base of ~9 mn) both through new plans and fixed wireless access (likely to be launched when 5G reaches critical mass). It also continues to build on enterprise use case both for large enterprises and small and medium businesses. Thus, with no tariff hike in sight, 5G users’ data usage trend will drive the ARPU in the near and medium term. Nonetheless, we remain constructive on Jio on a medium/long term basis. We believe that superior spectrum portfolio along with superior digital ecosystem offering lends Jio a competitive advantage even in 5G (as seen in the 4G foray).

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