INSUBCONTINENT EXCLUSIVE:
Mukesh Ambani, has been at the vanguard of a data revolution in the country, playing a leading role in the re-rating of the Reliance stock
over the past couple of years
data packs affordable to millions of Indians.
In the March 2018 quarter, the average revenue per user (ARPU) of Jio was Rs 137, compared
with Rs 154 in the previous quarter, while the subscriber base at the Mumbai-based company rose to 186 million from 160 million in the three
months.
According to estimates by Kotak Institutional Equities, Reliance Jio had an RoCE of 1.1 per cent in FY18, and it is expected to jump
to 8.9 per cent in FY23, with an upward traction in ARPU visible from 2020
rival Bharti Airtel has also talked about lower competitive intensity
In the post-earnings call, the Airtel management said that while the downtrend in ARPU continues, the worst may be over and the key topline
metric for the industry may recover in the long term.
The telecom venture of Reliance has been posting positive operating profit in the past
three quarters and had a profit of Rs 723 crore in FY18
It uses the unit of production (UoP) accounting method to compute depreciation, analysts say
Not conventionally used by telecom companies, UoP requires costs to be amortised based on cumulative production over the economic life and,
analysts say, is traditionally used in sectors with finite resources such as oil and gas.
At Jio, depreciation will be computed on the basis
By contrast, other telecom companies use the straight-line method to compute depreciation
Final profit figures using the two methods would be different
Hence, the Street is looking closely at the RoCE to assess the future valuation of the telecom business.
Separately, the scope for earnings
surprises from the conventional business such as refining and petrochemicals is limited, with the Street already factoring in incremental
growth due to the commissioning of new complex units such as the refinery off-gas cracker (ROGC) and petcoke gasification.
On the
paraxylene, recently commissioned ROGC plant and downstream units of PE and MEG
Brent-Dubai differential and lower crude throughput
The Street is pricing in GRM of $11-12 per barrel in the projected earnings for FY19 due to incremental gains from petcoke gasification
