Billion-dollar investments, marquee shareholders, and a business built without any Chinese footprint, India’s 10-month old Jio Platforms appears to have all the right ingredients to become the next big global tech giant.
At a time when the world is dealing with a raging pandemic and the global economy is in turmoil, Jio Platforms, a digital conglomerate spun off from India’s Reliance Industries (RIL), has managed to raise over $20 billion (Rs1.52 lakh crore) from investors such as Google and Facebook.
Owned by Asia’s richest man Mukesh Ambani, Jio Platforms dabbles across most new-tech segments such as cloud, media, digital commerce, financial services, gaming, education, healthcare, agriculture, e-governance, and smart cities.
“Reliance has proved its mettle time and again as a company with great tech execution prowess, owing to which it has a high chance of acquiring a seat at the high stake table,” said Ravinder Vashist, co-founder of Mumbai-based venture capital fund, Roots Ventures. “It may take some time to establish its credentials as its technology…but with time it’ll only get stronger.”
The rising anti-China sentiment will work in Jio’s favour if it looks to expand outside India, said Sonam Chandwani, managing partner at KS Legal & Associates. Jio has said that it is the first Indian telecom company to have developed an in-house 5G tech solution. For its 4G expansion in India, it majorly relied on Samsung.
RIL’s Jio business was the brainchild of Ambani’s twins Isha and Akash.
“The idea of Jio was first seeded by my daughter, Isha, in 2011. She was a student at Yale and was home for holidays. She wanted to submit some coursework, and she said, ‘Dad, the internet in our house sucks’,” Ambani said at an event in 2018.
His son Akash further convinced him about how digital broadband is the future.
“India at the time was suffering from poor connectivity and a severe scarcity of the most critical digital resource: Data. It was not only scarce, but it was priced artificially high to make it unaffordable to a majority of Indians,” Ambani said.
So in 2016, RIL launched its telecom business, Reliance Jio.
Within a year of Reliance Jio’s launch, India became the top mobile data user across the world, as per Amitabh Kant, CEO of government’s think-tank Niti Aayog.
However, this achievement came at the cost of cut-throat competition that Reliance Jio triggered in India’s telecom industry, forcing the then market leaders like Bharti Airtel to dramatically slash tariffs, which washed away a chunk of their revenues. In 2017, Airtel and Idea posted losses and spared no effort in blaming the new entrant for their downfall.
Unfazed by the criticism, Reliance Jio continued to grow. At present, it has a user base of around 400 million, which can now be cross-sold products and services such as e-commerce, streaming content, payment wallets, education, and healthcare.
Enter Jio Platforms.
In November 2019, Ambani announced the launch of Jio Platforms, a subsidiary of RIL that the company describes as “a next-generation technology platform focused on providing high-quality and affordable digital services.” Jio Platforms has made significant investments across broadband connectivity, smart devices, cloud and edge computing, big data analytics, artificial intelligence, internet of things, augmented and mixed reality, and blockchain, as per RIL.
The biggest strength of Jio Platforms is the opportunity to cross-sell to Reliance Jio’s existing userbase, according to advisory firm Greyhound Research.
Some of the world’s largest internet firms are already either an ally of Jio Platforms or facing direct competition from it. While Facebook, Google, and Microsoft are Jio’s partners, two of the world’s largest retailers, Amazon and Walmart, are direct rivals.
There are source-based reports that claim Amazon is likely to buy a 40% stake in Reliance Retail, the retail venture of RIL, for $20 billion. Though the deal has not been confirmed yet, it won’t surprise many. After all, several global bigwigs have acknowledged the potential of Reliance Jio and Jio Platforms.
In 2018, Netflix CEO Reed Hastings praised Reliance Jio for making the internet affordable for all. “We hope someone would do a Reliance Jio in every other country,” he said.
Earlier this year, US president Donald Trump, too, praised Ambani’s Jio model and congratulated him for his “great work” with 4G tech.
And in June, US secretary of state Mike Pompeo appreciated Reliance Jio for its “clean technology” referring to the fact that the company, unlike most of its global peers, is not dependent on Chinese telecom equipment providers.
“The world today is looking for alternatives (to China), and that is where brands with full end-to-end 5G stack are in favour. Jio, with its string of acquisitions, has developed good in-house system integration expertise and is further eyeing new partnerships to bolster its 5G capabilities,” said Prabhu Ram, CMR’s Industry Intelligence Group head.
The latest series of investments make it even easier for RIL to eye newer markets, said Chandwani of KS Legal & Associates. “Given the high cost-low return nature of the industry, capital is an issue for many firms. Jio has dealt with that already.”
And Ambani is definitely not stopping. “What we’re seeing is only a small piece of the larger, bigger opportunity,” Mathew Oommen, president of Jio Platforms and a former US telecom executive, told The Fortune last month. “You would be surprised, the number of investors we have turned down,” he added.
Analysts believe that the carefully curated list of investors will give more power to the already powerful Jio brand.
The partnership with Facebook, for instance, can help Jio Platforms strengthen its data analytics capabilities and use that to target Indian shoppers better, Greyhound Research said in a report on July 13. On the other hand, investment from Silver Lake could go a long way in helping the company list on overseas exchanging, emulating the success that the private equity firm had with Alibaba Group in 2014, Greyhound Research said.
With its recent acquisitions in other sectors like online retailing and e-pharma, among others, analysts at Greyhound further suggested that Jio Platforms can go for listing either on Nasdaq or on New York Stock Exchange as early as 2021-2022. “The valuation range could be $150-200 billion.”
So far, Jio Platforms, which aims for a valuation of around $100 billion, has not said anything about going public. RIL is listed on the Bombay and New York stock exchanges.
RIL’s sudden and massive success in the internet space has also made many observers suspicious, which could prove to be an impediment in the future.
Some worry that RIL’s massive presence could make it too powerful to control.
For example, with a wide range of services under one brand, Jio Platforms is becoming a goldmine of personal data such as passwords and fingerprints. This raises concerns about data privacy and security.
“The market’s confidence in this business model has come a full circle. From complete disbelief then, to near euphoria now,” brokerage firm Edelweiss said in its recent report on RIL.
Jio’s list of unfulfilled promises may also raise eyebrows.
In 2016, Ambani had said that “no Jio customer will ever have to pay for voice calls again, for any network.” However, in October 2019, the company announced that it was going to start charging six paise a minute for calls to other mobile networks. The pressure to make money may force the company to take more such steps, and that’s possibly going to slow its growth.
“Steeper-than-expected hikes in telecom tariffs may slow down customer additions,” warned Edelweiss in its report.