RJio IPO possible in 2021: CLSA report

Apart from the big events led by 4G and 5G spectrum auctions, this year will also witness a “possible” initial public offering of Reliance Jio Infocomm (RJio), while revenue for the sector continue to grow.

“The year 2021 would likely see big events; 4G renewal spectrums auction, crash in 5G spectrum prices, review of Adjusted Gross Revenue (AGR) dues, telcos’ stake sales in merged Indus Tower and RJio IPO,” according to a report by brokerage firm CLSA.

Sector revenues may grow again (after growing 20 per cent in 2020), while tariff hikes and rising 4G data adoption will drive 17 per cent compounded annual growth rate (CAGR) in sector revenues by financial year 2023. After the adverse AGR case verdict in 2020, there could be a potential review of AGR dues led by incumbents’ petitions.

Finally, 2021 would be decisive for digital services, especially for RJio and Bharti Airtel’s varied models of own apps and content that would boost subscribers and average revenue per user (ARPU, a metric to gauge the financial strength of a telecom firm).

“We factor in 25-30 per cent tariff hikes for Bharti Airtel, Vodafone Idea (VIL) and RJio in 2021 and forecast 17 per cent CAGR in India mobile revenues to ₹2,359 billion ($32 billion) by FY23. Rising mobile Arpu, 4G penetration, VIL’s planned $3.4bn fund raising, potential AGR review and next spectrum EMI due in FY23 will allow sector improvements,” it said.

“Meanwhile, marketshare battle will intensify; even as we forecast RJio revenue share reaching 45 per cent by FY23, we also foresee upside potential to Bharti Airtel’s 31 per cent share, it added.

Rewind to 2020

Bharti Airtel was outperforming the market by 33 per cent, till AGR case hearing resumed in mid-July and stock were up 12 per cent by the year-end. However, VIL outperformed the market by 58 per cent despite bigger AGR hit as it continued in operations and announced ₹25,000 crore ($3.4 billion) fund raising.

While Indus Towers (erstwhile Bharti Infratel) was up 47 per cent from March with VIL continuing in operations and the much-awaited merger finally concluding. Tata Communication outperformed by huge 162 per cent and Sterlite Tech outperformed by 39 per cent.