How 5G spectrum win could drive Reliance Industries stock

“With the 700 MHz acquisition of Jio, we believe that the company is well prepared to roll out standalone (SA) 5G. The advantage of SA 5G is that the company will be able to offer true low-latency applications, such as slicing. Bank of America (BofA) Securities said it is difficult for its peers to offer it, given the lack of spectrum (the telcos cannot roll it out on the 4G band).

While 5G SA still lags behind in terms of handsets, equipment and applications, BofA finds Jio in a better position than its peers to provide differentiated service. This can help the company capture high-end customers from its competitors – increasing potential competition at the high-end.

BofA’s Buy Rating Shares of RIL Comes with a target price of 2,820 each, which it believes could be triggered by higher refining and petrochem margins in Jio, stronger customer additions. However, its diversification, aggressive tariff waiver on Jio and higher capex sees downside risks of negative cash flows for several years.

5G Services, which can provide data speeds nearly 10 times faster than 4G, is expected to be launched by October this year. Jio said it would be ready for a pan-India rollout of 5G “in the shortest possible time”, without giving specifics.

Nomura believes that with the highest ever outlay, the quantum of incremental tariff hike/5G premium is significantly higher for Reliance Jio as compared to Bharti Airtel and Vodafone Idea (Vi).

“5G tariff plans will be a major monitorable in the near term, and may provide the next phase of ARPU for 5G premium (vs 4G) telcos. We have buy ratings on Bharti (Bharti In) and RIL (RIL In, the parent unit of Reliance Jio).” 2,885 on the shares of Reliance Industries.

The views and recommendations given above are those of individual analysts or broking companies and not of Mint.

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