Is Facebook-Jio deal bad news for Bharti Airtel and Vodafone Idea?

By Rajan Nath - April 23, 2020 1:04 pm

The mega-deal between Facebook Inc. and Jio platforms Ltd has amused the investors for now. Also, it will be interesting to see the implications of the deal for India's telecom industry. A report suggests that, while the shares of Jio's parent Reliance Industries Ltd (RIL) have risen, the stocks of Bharti Airtel Ltd and Vodafone Idea Ltd were trading high as well.

As per the report, an analyst at Dolat Capital Market Pvt. Ltd said in a note that "the premium valuations and massive investments in Jio is positive for Bharti and Vodafone Idea for future investments by other players if any."

A question that remains in the mind is that if the reduction in leverage at RIL results in Reliance Jio dragging its feet on the further tariff hike. Reportedly, the RIL can reduce the leverage either via infusions or increasing profits, or, doing both.

An analyst at Jefferies India Pvt Ltd. stated that the aggression suits a new entrant and not a market leader. "If Jio cuts tariffs, it hurts itself the most. Secondly, Reliance Jio's tariff remains at a 7-20% discount to that of peers and its Jio phone offering should help the company remain competitive and help the subscriber additions as it has in the past," the analyst added.

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Also, it is pertinent to mention that the equity infusion by Facebook is in Jio Platforms Ltd. Since this will reduce leverage at the RIL consolidated level, the financial metrics of Reliance Jio Infocomm remains the same.

-PTC News