MUMBAI: A decade after storming into the Indian telecommunications or telecoms market with free calls and cheap data that decimated its rivals, Mukesh Ambani’s digital venture is aiming for a historic milestone this week with India’s largest-ever initial public offering.
But unlike in the triumphant fall of 2016, when its aggressive strategy stoked a price war that left only a single competitor profitable, Ambani’s upstart is coming to the market more cautious and humble.
Jio Platforms Ltd, the owner of India’s largest wireless operator, is seeking a valuation that’s roughly 10% lower than its nearest sector rival, Bharti Airtel Ltd.
The listing marks billionaire Ambani’s return to the capital market after 20 years, an offering that he said will “unlock great value” for parent Reliance Industries Ltd.
But a closer look paints a more sobering picture. Reliance shares are on track for their worst annual performance since 2011 and the energy-to-entertainment conglomerate had to prune Jio’s valuations to attract marquee investors.
It’s a reflection of the roller-coaster ride for the nation’s telecoms sector, which features some of the world’s cheapest data plans and a massive user base.
Jio’s market value adjustment shows that the market is saturating fast and investors now prefer companies that earn more from each customer over those that service more subscribers.
“We believe that, following its listing, Jio will likely need to demonstrate growth to public shareholders,” Nomura Holdings Inc analysts Bineet Banka and Abhishek Bhandari wrote in a note dated Oct 10.
They added that Bharti Airtel remains their top pick in the sector “due to its higher proportion of premium subscribers, which should insulate it from downtrading and subscriber attrition” if telecoms services get costlier.
Jio’s IPO opened its books for retail investors yesterday, for a subscription period that ends Oct 23.
Anchor investors including BlackRock Inc, Fidelity Management & Research, Capital Group and Allianz SE took stakes worth a combined US$854mil at the top end of the marketed range.
Furthermore, Jio’s US$3.1bil share sale values the company at US$107bil at the top end of the marketed price range of 1,065 rupees to 1,119 rupees apiece, compared with about US$123bil for billionaire Sunil Bharti Mittal’s wireless operator.
On paper, Jio is bigger than Bharti Airtel on most counts.
It leads in both wireless and fixed broadband markets, boasts more than 500 million subscribers and is ahead of Bharti in new opportunities such as the under-penetrated home broadband.
But in average revenue per user, or Arpu – a key metric monitored by sector analysts and investors – Ambani’s venture has lagged Bharti for seven straight years, according to data compiled by Bloomberg. — Bloomberg
