'Watch For 5G Roll-Out': Stock Experts on Reliance’s Announcements

Mukesh Ambani made many disclosures about 5G technology, deal with Google and offerings like JioMeet and JioGlass.

Soon after Mukesh Ambani on Wednesday, 15 July, made a slew of major announcements, including plans for a complete 5G solution developed from scratch, the shares of telecom operators like Airtel and Vodafone reportedly fell 4-7 per cent.

Addressing the Reliance Annual General Meeting (AGM) Mukesh Ambani announced that Google will be a strategic partner in Jio Platforms, investing Rs 33,737 crore for a 7.7 percent stake.

Ambani added that the target of capital raise for Jio Platforms was complete with the onboarding of Google, the 13th investor to be roped in by the firm.

According to a report in BloombergQuint, stock prices of Reliance fell by the time the AGM concluded after more than doubling in value from March onwards. “We remain positive on the company’s long-term growth plans and would advise investors to hold the stock for healthy returns,” analysts at Religare Broking Ltd reportedly said.

Here are some of the key announcements made by Ambani during Wenesday’s AGM:

• Jio is developing a complete 5G solution from scratch, with trials to be launched as soon as the 5G spectrum is available.

• Jio Platforms has built up significant technologies with 20 startup partners and is now inviting other startups for the same.

• Google and Jio to jointly develop an Android-based smartphone operating system.

• Reliance Jio will connect 500 million customers and over 50 million homes and businesses over the next three years.

• Jio to bring customers, local kirana stores together through Jio Mart’s grocery model

• Delay in the $15 billion deal with Saudi Aramco due to “unforeseen circumstances in the energy market"

• Reliance now a zero net debt company

• JioGlass technology for virtual meetings through holographic video calls.

‘Long-term Growth Trend Still Intact’

Noting that gains in the company’s stock this month were due to the growing anticipation over the announcements to be made at the AGM, analysts said that delays in the Aramco deal had likely dampened spirits of investors.

According to a report in Business Standard, Nomura, a leading brokerage firm, noted that with the raising of a large amount of capital, Reliance seemed to have met its equity requirement while at the same time pursuing the Aramco deal.

“We reaffirm our Buy rating and target price of Rs 1,900,” Normura said.

Analysts at Jefferies said while 5G spectrum is expected to be auctioned next year, with operators only buying into it in 2022, “Reliance's move on 5G could result in an earlier than expected 5G capex cycle”.

‘Watch Out for the 5G Rollout Timelines’

According to analysts at Edelweiss Research, affordability is not the main issue behind smartphone adoption.

“We expect large scale commercial 5G launch by operators by 2024–25, and advancement to the next one-two years is likely to entail significant capex, which can be negative for the sector. Watch out for the 5G rollout timelines. Retain ‘BUY’ on Bharti Airtel and Bharti Infratel with target prices of Rs 712 and Rs 235, respectively, and ‘REDUCE’ on Vodafone Idea with a target price of Rs 9,” experts noted.

Antique Stock Broking noted that the development of the Jio Platform along with the Reliance Retail vertical caused them to raise “valuation multiples for JIO Platforms and Reliance Retail in our SOTP, thereby revising our target price to Rs 1,960/share (from Rs 1,600/share), even as we maintain our BUY rating on the stock.”

(With inputs from BloombergQuint and Business Standard)