There are decades where nothing happens; and there are weeks where decades happen: Vladimir Ilyich Lenin
Reliance Industries Limited, with its telecom and digital solutions business — Reliance Jio — has proved the latter half of Lenin’s above observation in these last few weeks. Along with lining up and closing a fund raise round with 14 marquee strategic and financial investors from around the world and a slew of announcements made at the AGM on July 15, the company has positioned itself as a key player on the global stage.
On September 27, 2017, Reliance Industries’ Chairman Mukesh Ambani said that “Data is the new oil. India doesn’t need to import it. We have it in super abundance.” It is this thinking, focus on carving Reliance Jio as not just a telecom company, but a digital platforms company that provided requisite future readiness and valuation for the company that made it an investors’ pick, even during the unstable and chaotic COVID-19 pandemic.
The company’s strategic direction, plan and execution is complemented by the opportunity of the Indian market that is young, enterprising and ripe for digital technologies adoption and scaling. The fact that no other Indian company has managed to execute and efficiently cater to this country’s consumer demands makes Reliance Industries’ Jio business an attractive bet for some of the leading global investors.
The company’s well-thought-out and executed transition from focus on oil (energy) to digital platforms (telecom and other digital industries) contributed significantly for the group to evolve as the first Indian company to breach $150 billion in market capitalisation.
Google, Facebook, Microsoft, Intel and Qualcomm are leading companies in the world in their domains, and, most of their products and offerings are mutually exclusive and complementary in nature. For Reliance Jio to partner and seek strategic investments from these companies is a significantly advantageous move. For these global technology players too, this partnership provides a partner with the utmost proven capability to cater to the India market.
Google and Facebook have, in the past, independently tried (and succeeded to a fair extent) and connected the unconnected Indian populace to the Internet. Google with its Railway Station WiFi project, Android One and the current ‘AI for Good’ initiatives have developed India-specific Internet onboarding and scaling programmes for India. Facebook with Internet.org, Free Basics and Express WiFi initiatives has tried the same. Both these companies, and Microsoft, view the Indian Internet consumer and her value to their company with different lens, and for Reliance Jio, this combination could be complementary and collectively exhaustive. Intel and Qualcomm have both strong 5G technology and chipset focus, which could be further beneficial for Jio.
Some of the biggest private equity and financial investment firms, including KKR, Silver Lake, Vista Partners, General Atlantic, Mubadala, etc. that have invested in Reliance Jio provide the requisite credibility and potential investor confidence for when the company is ready to go for public listing. Also, for these big, global PE firms, in the current environment, Reliance Jio is one of the rare, stable investment options with significant potential upside for growth.
In the July 15 AGM, RIL announced, as a part of its Jio business, the development of an indigenous 5G solution. This is an ambitious goal for the company. Strategically, it could lessen the dependence on the current technology leader in the space — Huawei — and this will be in line with the prevalent anti-China sentiment across India, it would bolster the ‘Make in India’ goal, and develop the much-needed 5G technology skill set and expertise in India.
However, this could also be one of the challenging projects that the company could have undertaken, considering that there is lack of research labs and scarce skill sets and expertise in India for end-to-end 5G solution development from scratch. This is where the strategic partnership with Intel and Qualcomm could prove useful.
Also, it has not been specified as to which specific 5G solution development it would undertake — RAN (Radio Access Network) element, or the RF (Radio Frequency) Chipset, or, a full-fledged 5G mobile device? For each of these, the complementary component, services, testing and manufacturing, and other value chain player ecosystem, is currently missing in India.
Also, for most of the companies working on new, cutting-edge technology solutions, the scale of economies at a global level makes business sense. RIL has announced that once its 5G technology has been proven at a national level, it will be better placed to export the tech to global operators.
Researching, innovating, developing and scaling advanced deep technology solutions can be very challenging and time consuming. We are still awaiting updates on the pan-India blokchain network which was announced at last year’s AGM. Some of these technology solutions could prove extremely tricky, especially with lack of adequate local talent.
Having said that, RIL, especially for its telecom and digital businesses, has in the past invested in global talent to be based out of India. The company also proved naysayers wrong when it entered a mature mobile telecom market as a challenger, and garnered 100 million subscribers in just six months.
RIL, in recent years, especially in digital technologies and consumer business, has been taking up ambitious, unprecedented bets and successfully delivering. One hopes that the 5G target is also met.
Jayanth Kolla is Partner, Convergence Catalyst. Views are personal.
Please click here to follow our complete coverage of RIL's 43rd AGM.
Disclaimer: Reliance Industries Ltd., which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
