“2022 will see big events led by the 5G spectrum auction and a likely mega initial public offer (IPO)/separate listing of Reliance Jio from RIL, following the 33 per cent pre-IPO stake sales to 13 investors including, 10 per cent to Facebook and 8 per cent to Google in 2020,” the global brokerage said in a research note.
CLSA values Jio’s mobile business at $99 billion EV (enterprise value) at 11.5x EV/Ebitda and includes $5 billion EV for JioFiber — the home broadband business.
It added that “a likely Jio IPO would be a sector valuation catalyst,” with the market leader’s pre-IPO $20 billion deals valuation itself at 10x EV/Ebitda”.
Strong enthusiasm around a potential big-bang Jio IPO comes at a time when the days of fierce price wars in India’s debt-laden telecom sector are drawing to a close in the recent aftermath of broad-based prepaid tariff hikes taken by the Big 3 telcos to boost revenues on the back of the recently announced telecom reforms package by the government.
Jio Platforms, Reliance Jio’s parent, has already raised over a whopping Rs 1.52 lakh-crore from a clutch of marquee global investors, including Facebook, Google, Intel Capital, Qualcomm Ventures, and top private equity players such as Silver Lake, Vista Equity Partners, General Atlantic and KKR amongst others by selling a combined Jio 33 per cent stake. Besides the telecom business, Jio Platforms (JPL) houses RIL’s content/apps, digital investments and tech capabilities.
Brokerage CLSA also expects the government to cut mid-band 5G spectrum base prices in 2022, failing which it warned the upcoming spectrum sale won’t succeed.
“While 4G spectrum purchases of $11bn in 2021 were due to renewal compulsions, the upcoming 5G auction will succeed only if the price is cut from the exorbitant $7bn/100 Mhz for pan-India in 3.3-3.6GHz band,” the brokerage said.
It added that “a cut in 5G spectrum prices and successful auctions” would open doors to new sector opportunities.
Late last month, the Telecom Regulatory Authority of India (Trai) kicked off the process of setting reserve prices of 10 spectrum bands earmarked by the government for 5G services. These include the coveted 600 Mhz and the millimeter wave (mmWave) bands, proposed to be auctioned around April-May this year.
The telecom industry has repeatedly sought lower base pricing for 5G spectrum. And the sector regulator has conceded that spectrum unsold amounts to spectrum wasted, and accordingly, has invited views on whether a methodology followed elsewhere globally should be used to value 5G airwaves.