Jio is setting the pace in 5G rollout race: IIFL Capital Services

24 Apr 2023 , 11:20 AM

Analysts at IIFL Capital Services estimate that mobile daily revenue run-rate (DRR) growth was healthy at ~3.6%. Based on triangulating Jio’s disclosures and DoT data, analysts at IIFL Capital Services estimate that Jio’s unique 5G location count is almost 2x Bharti’s. Jio’s FCF generation of Rs 107 billion after spectrum payout in FY23, despite rapid 5G rollout, came in the wake of an estimated US$3 billion capex creditor buildup. Analysts at IIFL Capital Services have largely maintained their estimates and US$85 billion EV. With consumption spending likely to remain weak in the near term and general elections also not far behind, they expect 4G pre-paid tariff hikes only in FY25. Analysts at IIFL Capital Services estimate 12% EBITDA growth in FY24, followed by 25% in FY25. Jio’s recently launched attractively priced FTTH plan and its intent to focus on 5G FWA during FY24, may provide a fillip to its home broadband market thrust.

Healthy DRR growth in Q4; robust FCF generation in FY23

QoQ revenue growth, adjusted for two fewer days in Q4, was 4%. Analysts at IIFL Capital Services estimate that mobile DRR growth was ~3.6% — better than expected. A few cost line items saw sharper-than-expected growth; but NW opex remained flat despite 5G rollout, with Jio capitalizing on most of this. The YoY increase in cash capex ex-spectrum in FY23 was modest to Rs258 billion, despite rapid 5G rollout. Analysts at IIFL Capital Services estimate that the Rs240 billion increase in other liabilities is mainly on account of vendor credit.

Rapid progress on 5G rollout

DoT website reveals 5G BTS count for the industry at 141k, as of 2^nd April. Jio reported its current 5G unique location/BTS count of 60k/125k+. Assuming that Jio added 15k BTS in the past 20 days, its 5G BTS count as of 2^nd April would have stood at ~110k. This implies that Bharti’s 5G BTS count would have stood at ~30k. Since Bharti is deploying only one BTS per location (3.5GHz), its unique 5G location count would also have been ~30k — just over half of Jio’s.

Maintain estimates; EV unchanged at US$85 billion

For Jio, IIFL Capital Services estimates blended (mobile + FTTH) ARPU for FY24/25 of Rs186/Rs213. While Jio’s 5G plans priced above Rs 239 currently offer unlimited data allowance, analysts at IIFL Capital Services expect Jio to introduce daily data limits once the 5G network fill-factor improves in the next 12-18 months. This should enable better monetization of 5G investments.