Billionaire Mukesh Ambani’s plan to roll out broadband internet services to Indian households this year under Reliance Jio Infocomm Ltd. has the potential to alter the segment’s competitive landscape, credit rating company S&P Global Ratings says.
The new service may add $5 billion to parent company Reliance Industries’ valuation, according to CLSA India. The brokerage firm anticipates a 40-billion rupee ($611 million) boost to Reliance’s earnings before interest, taxes, depreciation and amortization in three years on the back of the plan.
“In the past, fiber-to-home was not the primary focus for telecom players in India as they were pursuing growth in the wireless business,” Mehul Sukkawala, senior director for corporate ratings at S&P Global Ratings said in an email. Sukkawala sees Reliance Jio’s financial muscle being able to change that.
Reliance Jio upended the Indian telecom industry, after its entry in 2016, forcing rivals to merge or exit. It posted its first profit in the October-December quarter, almost 16 months, after provoking a price war with free calling and data.
Reliance may use an aggressive customer pull strategy even in the broadband services space, as it did with the mobile business, CLSA India said in an April 10 note. “It already offers high-speed broadband in select urban areas as a free service, possibly to seed clients and get insights into usage patterns,” according to the note.