Million dollar baby! Infant Reliance Jio set to give peers many sleepless nights
Comment of the Day

March 07 2017

Commentary by Eoin Treacy

Million dollar baby! Infant Reliance Jio set to give peers many sleepless nights

This article by Swati Verma for the Economic Times may be of interest to subscribers. Here is a section:

The telecom arm of Reliance IndustriesBSE -0.01 %, which debuted in September last year, has already set a benchmark by hitting a subscriber base of 100 million in record 170 days. And with aggressive plans in place, it looks set to raise the bar, giving sleepless nights to the incumbents. 

The company is heavily banking on building significant data capacity and triggering price elasticity for data demand. 

At Jio’s first analyst meet last week, the company management indicated that currently about 1b GB/month data is getting consumed on Jio and it will have the capacity to offer about 4b GB data per month by the end of FY17. According to the management, it should be able to cater to 60 per cent of estimated data demand at 6b GB per month by FY21. 

Eoin Treacy's view

Reliance Industries has a footing in just about all of India’s biggest industries. It went through a significant capital expenditure program to build the nation’s most comprehensive 4G network and is now reaping the rewards. Considering that the vast majority of India now has the opportunity to move from 2G to 4G the potential for growth in ancillary services is considerable.  

We can assume Bollywood downloads and cat videos will be as popular in India as they are just about everywhere else but the potential for growth in online payments, banking, shopping and education all represent major growth trajectories.  

Reliance Industries had held a progression of higher reaction lows since 2012 but has experienced an explosive breakout over the last three weeks to post new 9-year highs. Some consolidation is possible once the breakout runs its course but a sustained move below INR1,000 would be required to question medium-term recovery potential. 

The Indian Rupee is trading above the trend mean and testing the upper side of a yearlong base. A sustained break to new recovery highs would signal a return to demand dominance beyond the short term. 

The Nifty Index continues to test the 9000 area, representing the upper side of a two-year range, but will need to sustain a breakout to confirm a return to medium-term demand dominance. 


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