jio, reliance jio

Reliance Jio has shaken up the telecom industry in India, there’s no doubt about that. But, the company is still not sure about whether the populace would accept its paid services or not. Thus, the Mukesh Ambani-led telecom giant further extended the three-month free data and voice offer for its Prime subscribers — whose count was reported to be 72 million. This development instead of being seen by market analysts as negative for the revenues had led the share prices of Reliance Industries to shoot past its 52-week high mark.

Reliance Industries, the oil-to-telecom business owned by Mukesh Ambani, has recently been on a constant rise due to the growth of its telecom business launched in September last year. The company has pumped over ₹200,000 crore to build out the infrastructure, as well as market the 4G LTE services, launched under the moniker of ‘Reliance Jio Infocomm Ltd.’ Earlier, it announced that it will start charging users for its network services, starting April 1, but the tables turned once again.

On Friday, the newest telecom entrant announced that it had signed up over 72 million users to its paid subscription plan. This figure was on the higher side of 50 million subscribers, which was being widely expected by market analysts. But, Reliance Jio is not satisfied with the said figure and wants all ~120 million current users to adopt its paid subscription plan. It has announced a ‘Summer Surprise’ offer, which requires you to buy the ₹99 Prime subscription+ a recharge of ₹303 (or higher), to attract the final few remaining. It also extended the deadline to sign up for Prime membership to April 15.

The new 3-month free services offer has left a handful of market analysts completely baffled, while others are basking in the glory of Reliance Industries’ rampant growth. The former group believes that Jio could’ve easily brought in revenues close to ₹4,882 crore or $753 million in the next three months. But, the telecom giant has decided to forego the same in favor of a larger user base — which is being supported by the latter half. In a note to its clients, analysts at Kotak said (via LiveMint),

At 72 million, Jio would capture nearly 55% of all 4G handsets in the market – large enough for Jio to feel confident of its product, in our view. (But to the) 72 million subscribers willing to pay, Jio says, “Thanks but not yet; here’s another three months of free”; we say “We don’t quite understand.”

Today, however, the share market reacted quite positively to the changes induced towards the end of the previous week. But, analysts have cited Reliance’s investments in telecom via Jio as not the only reason for the uptick. But, the company’s traditional energy and petrochemicals business also have $40 billion worth of projects in commissioning phase. This growth and significant free cash flow have led Airtel (once the largest telecom carrier) to lose nearly $700 million today.

This resulted in Reliance Industries’ share prices to soar to its new 52-week high of ₹1,380 in early trade. The scrip closed at ₹1,373, up about 4 percent but analysts are now recommending ‘buy’ ratings for the stock. The target price for the same is now being set at close to ₹1,500.

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