Digital services, tech stacks to sustain Jio Platforms growth; ICICI Securities upgrades Indian telcos' valuations

New Delhi [India], October 24 (ANI): ICICI Securities has upgraded valuations for Indian telecom companies that are under its coverage, with renewed optimism stemming from the healthier business and financial structures in this key space.

For Jio Platforms Ltd (JPL) (earlier Reliance Jio), which is dominant in mobile and fixed broadband (FBB), ICICI Securities believes its growth will sustain, aided by digital services and tech stacks.

ICICI Securities in its report put out on Friday said it expects Jio's EBITDA/Profit After Tax (PAT) CAGRs of 18.1/ 21.1 per cent over FY25-28E.

"We assign a 16x EBITDA (adj.) multiple; resultant equity value is USD 148bn for Sep'27E," the report read.

JPL's telecom business' RoCE (Return on Capital Employed) expansion is likely at an inflection and is expected to reach 21.4 per cent in FY28E (FY25: 14.3 per cent) - aided by FCF (Free Cash Flow) generation potentially trebling to Rs 558 billion and supporting deleveraging.

"Growth would likely be driven by new frontiers, including FBB, digital (B2C/B2B and managed services for MSME) and monetisation of its own tech stack, particularly UBR-FWA. UBR-FWA, could unlock notable doors for global partnerships (potential population of 3.9bn in untapped markets)," the report read.

Also, ICICI Securities believes JPL could work closely with Reliance Intelligence to deploy AI. "Other group synergies - shift to renewal energy/telecom infra's cost

optimisation - shall emerge too, boosting EBITDA."

On the overall telecom business front, there is greater visibility towards an extended premiumisation trend aided by the 5G push, said the brokerage in its report, hinting that there is little scope for valuation downgrades.

Telcos are in the 'value creation' zone, after a hiatus of 15 years, it has asserted.

The brokerage has upgraded Bharti Airtel to "BUY with a target price of Rs 2,400, versus Rs 2,028 now.

In their long report, the brokerage noted that key elements that could further spur momentum in the sector are JPL targeting the global market to monetise its technology stack, which should unlock huge opportunities.

Bharti, similarly, looking towards partnering for cloud and software services - it has already signed on a few customers - is another positive.

An improved tariff structure with minimal room for downgrade and renewed push for 5G adoption, coupled with JPL's likely listing in H1CY26 are expected to have possible positive influence on valuations, it added.

"Value unlocking for JPL's technology stack and software/cloud services for Bharti, as the companies expands operations beyond the domestic market, could be an immediate shot in the arm for the sector," it said, painting a bullish picture.

Besides, home services led by FWA (fixed wireless access) has a long run-way for growth, it predicted.

Also, the less-spoken advantage for Indian telcos is the increasing collaboration with global tech giants to distribute their products in India.

"Examples include Perplexity, Google and other tech companies partnering with Bharti, and Meta, Google and several others joining hands with JPL. In fact, a few of these companies have also bought equity stakes to

deepen their relationships," ICICI Securities said.

JPL is also driving new business - content, storage, digital enterprise solutions,managed services for MSME and AI deployment powered by Reliance Intelligence.

These new frontiers could create more value over the medium term, in our view, the report said.

ICICI Securities conservatively estimates JPL's (non-connectivity) net profit CAGR of 46.7 per cent over FY25-28E. JPL's IPO, and relatively higher valuations should benefit the entire sector.

Addressing shareholders at 48th AGM on August 29, Reliance Industries Chairman and Managing Director Mukesh Ambani announced that Jio will file for its much-awaited initial public offering (IPO), with plans to list by the first half of 2026. It would however be subject to necessary approvals, he said.

RJio has seen good success with 5G with its subs base at 234 million, implying penetration of 46.2%. The company continues to promote affordable 5G services to grab higher

market share in 5G subscribers.

RJio already enjoys 65-70% 5G subs market share, much higher than 50% in case of 4G+5G subs market share. RJio also has the technology lead, being the only telco to have standalone-5G services in India.

"Tariffs are structurally on an up move with lower opportunity to downgrade, and operators are pushing for the adoption/penetration of 5G services. We envisage ARPU growing higher than expected for a much longer period. This should aid consistent growth for mobility," it said.

RJio's journey was marked by high upfront investments, market shake-up to domination, and now, transitioning to 'value creation'. RJio's foray into the Indian telecom space came when incumbents were driving slower expansion of data services, particularly 3G.

At the time, data was an aspirational product, with limited capacities and telcos faced capital crunch. RJio leap-frogged the industry to data democratisation, and generous allocation. Voice services were made unlimited free, and data was also unlimited with FUP - completely rewriting telecom space in India.

"RJio dominance into Indian telecom space was possible due to company's revelation to make data affordable and accessible to each individual; and data was allocated generously to experience its uses, and benefits. RJio uncluttered the tariff structure to simple offering, and removed risk of bill shocksm," ICICI Securities said. (ANI)

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