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5G CapEx including spectrum leads to higher net debt, ICICI Securities

Reliance Jio Infocomm Ltd.’s revenue grew 12% YoY, helped by rise in mobile subs base, faster growth in fiber-to-the-home and enterprise business. Ebitda grew 16% YoY, supported by lower spectrum usage charges (added 5% YoY to Ebitda growth), and higher Ind-Accouning Standard impact; adjusted for it, Ebitda growth probably was in high single digit.

RJio remains confident of driving higher revenue growth led by-

  1. adoption of 5G services, and therefore, higher data usage;
  2. FTTH subs growth boosted by Jio-back-up plan; and
  3. continued growth in enterprise business.

However, we see near-term challenge in earnings per share growth with rise in cost due to higher network cost, rise in depreciation and amortisation on capitalising 5G spectrum and network investment and higher interest cost (on 5G capitalisation).

CapEx spend in FY23 (excluding spectrum) was more than Rs 500 billion, which is much higher. Net debt (borrowing plus spectrum) is Rs 1,510 billion, and if capEx creditor is added, it would increase to more than Rs 1,750 billion. We have reduced our Ebitda estimates by ~3% each for FY24E and FY25E. Bloomberg

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