Does Jio-Facebook deal upsets Airtel and Vodafone Idea?

For now, investors seem excited about the mega-deal between Facebook Inc. and Jio Platforms Ltd and its consequences for the telecom industry in India. Though Jio's parent, Reliance Industries Ltd, shares have risen by more than 10 percent, even Bharti Airtel Ltd's and Vodafone Idea Ltd's shares have been trading higher.

by Niranjani Jesentha Kumari Prabagararaj

Updated: Apr 22, 2020 20:17 IST

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Jio Platforms

For Bharti and Vodafone Idea, high valuations and large investments in Jio Platforms are sentimentally optimistic for potential investments from other companies, if any," analysts at Dolat Capital Market Pvt. Ltd said in a note.

RIL may reduce the leverage either by infusions of equity or by rising profits, or of course, by doing both. Given that it has made a preference for keeping tariffs competitive and gaining market share, rather than rising income by raising tariffs, one issue in one street section is that the next tariff hike could be a long-distance away.

Aggression suits a new entrant and not a pioneer in the business. If Jio cuts tariffs it hurts most to himself. Secondly, the tariff of Reliance Jio remains at a 7-20 percent discount on peers' tariff and its JioPhone offer will help the business stay competitive and support subscriber additions as it has in the past." Also, note that Facebook's equity infusion is in Jio Platforms Ltd, and while this will reduce the consolidated level of leverage at RIL, Reliance Jio Infocomm's financial metrics remain the same. Having said all this, it is clear that it is foolhardy to expect tariff hikes any time soon. With the economic effects of large-scale lockdowns, it is unlikely that the government will accept any telcos proposals in the immediate future to increase tariffs.

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