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Reliance Jio set for strong growth in FY25 with tariff increase and 5G momentum: BNP Paribas

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In Short:

Reliance Jio is expected to perform well in 2025 due to potential increase in mobile tariffs and decrease in capital expenses. The company has a strong operating performance with a large number of 5G users and data volume growth. Analysts predict a positive outlook for Jio’s revenue and EBITDA growth. The telecom sector valuations have increased recently, with Jio well-positioned to benefit from a likely tariff hike. Antique Stock Broking predicts a 15-17% price hike in tariffs after elections.

Reliance Jio Poised for Strong Performance in Fiscal 2025: BNP Paribas

Reliance Jio is expected to perform well in fiscal 2025, driven by potential mobile tariff increases and reduced capital expenses, according to a research note by BNP Paribas released on Tuesday.

Positive Operating Performance

BNP Paribas highlighted that Jio’s operating performance has been strong, with significant subscriber additions and data volume growth. Over 100 million subscribers on the Jio network are using 5G services, and 28% of data volumes are now on the Jio 5G network.

The brokerage firm noted that Jio’s investment in 5G has helped increase its 5G user base to over 108 million and has boosted data usage per subscriber. Additionally, demand for Jio AirFiber has been healthy across 5,900 towns, resulting in record-high quarterly home connects.

Financial Performance

BNP Paribas indicated that Jio’s revenue and EBITDA growth were in line with expectations. Despite a flat average revenue per user (ARPU) at Rs 181.7, Jio added 10.9 million net subscribers during the fourth quarter of FY24.

The EBITDA margin improved slightly to 52.4%, and the firm believes that Jio is well-positioned to benefit from a potential tariff hike in the industry.

Industry Outlook

The report mentioned that the overall telecom sector valuations have increased in recent months, with expectations of a significant tariff hike driving the growth of companies like Bharti Airtel.

Antique Stock Broking has predicted a 15-17% price hike in telecom tariffs post elections, indicating a positive outlook for the sector.

Future Projections

BNP Paribas raised its FY25-26E EBITDA and fair value estimate for Jio to reflect the improved telecom sector outlook. The firm continues to be optimistic about RIL’s consumer businesses, which are scaling up successfully.

Reliance’s Digital Services EBITDA is expected to grow by 20% in FY25, primarily due to Jio’s tariff hike, and is projected to contribute 60% of RIL’s incremental EBITDA in FY25.

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