Why investors are swarming for Reliance Jio’s internet biz?
Published on : Monday 01-06-2020
Reliance Jio is categorized under the parent company Reliance Industries Limited (RIL). Reliance Jio is one of the talked companies in the last 4 years in the Indian market owing to its telecom services buzz. Currently, the Indian market is witnessing the worst slowdown in the last 30 years, but Reliance Jio enticing and bring investment from the global companies of billion-dollars.
The company established in September 2016 with a flow of free and unlimited offers, that created a revolution in the Indian telecom industry, and further, it continues to create kiosks in the operations of its telecom competitors. Reliance Jio is formed with a vision of “Digital India”. Moreover, after providing and serving free services for more than 3 quarters, the company came up with the first paid plan in July 2017. At that time, it already succeeded in having over 108 million users, in which 72 million were paid subscribers, paying Rs 99 for annual Jio Prime membership. Soon after, it becomes the world's fastest-growing telecom company.
“Before the establishment and launch of Reliance Jio, the average of 1 GB data cost for the Indian consumer was INR 225, which reduce to INR 18 in 2020. The global average of 1 GB data cost is INR 600, which is too higher compared to the Indian average”
The Transformation from Telecom to Digital
Reliance Jio always stated that the company missions are always beyond connectivity. They established connectivity as a lubricant to bring data, technology, and ecosystem opportunity in the Indian market and the company leads the market from the front.
RIL has a large team of skilled employees along with the physical assets in terms of liquidity, properties, technology, and software companies. Initially, Reliance Jio was aimed to bring the customers online to maintain a large base of loyal customers in the Indian market. This leads the company to democratize data to bring the people on its network and makes them a customer for all services they owning.
The parent company has futuristic thinking to make India better and believes in “Digital India”, as they also partnered with the Government of India (GoI) for “Make in India” campaign and “Digital India” scheme. Since, the launch of Jio, they are creating an ecosystem under Jio to further expands their reach to the customers in the urban and rural India, so they created in-house technologies and acquired companies as possible.
In the past three years, the company spent over USD 3 billion in the acquisition activities across the verticals, as per Morgan Stanley Research. The conglomerate’s notable acquisitions in the technology space include Embibe (learning and edtech), Haptik (conversational AI), NowFloats (SaaS for SMEs), Den Networks and Hathway (cable and broadband), Reverie (Indic language software), Saavn (music streaming), Radisys (5G and IoT), and more.
Later in 2019, the company revealed its ambition and long-term aim to expand in the Indian market with the diversification in technical services related to artificial intelligence (AI), internet of things (IoT), blockchain, online gaming, video streaming, multi-party videoconferencing, augmented reality (AR), virtual reality (VR), mixed reality (MR), eCommerce, retail, and health among others.
Global investors are congregating to take a stake in Jio Platform
In mid-May of 2020, Jio Platforms has attracted many foreign companies and generated an investment of USD 10.5 billion from companies such as Facebook, KKR, Vista Equity, Silver Lake, and General Atlantic. The company has diluted about 17.1% equity stake in Reliance Jio, which makes the valuation of the company to over USD 65 billion.
The platform received a funding of USD 5.7 billion from Facebook, USD 747 million from Silver Lake Partners, USD 1.5 billion from Vista Equity Partners, USD 870 million from General Atlantic, and USD 1.5 billion KKR. The table showing the percentage of ownership of companies in Jio Platforms by May 2020.
Company Name | % Stake |
---|---|
Reliance Industries Limited | 82.88% |
9.99% | |
KKR | 2.32% |
Vista Equity Partners | 2.32% |
Silver Lake Partners | 1.15% |
General Atlantic | 1.34% |
Note - It is expected that Microsoft Corporation may buy more than a 2.5% stake in Jio Platforms, which houses all of RIL’s digital and telecom initiatives.
According to the GlobalData, the company is expected to divest around 20% equity stakes in Jio to eliminates the debt from the company’s balance sheet by 2020. It is also said that the company is looking at an overseas IPO in the next 12 to 24 months. Also, its strategies to bring payments, digital wallets, and last-mile delivery service platform on the Jio Platform to increase its valuation to USD 100 billion and then go public. The Indian analysts predicting the company is focused on debt reduction, sentiment uptick with the incorporation of leading global companies, and equity dilution at tech valuations.
Current Market Position of Reliance Jio in the Indian Market (Source – TRAI)
Reliance Jio is the leading telecom service provider in the Indian market in 2019. Reliance Jio is the biggest gainer with a 30.5% share during the period of 2018-19.
Operators | Subscribers (in Million) | Market Share (Oct'18) | Market Share (Oct'19) |
---|---|---|---|
Jio | 331 | 17% | 31% |
Airtel | 323 | 27% | 30% |
Idea-Vodafone | 320 | 39% | 29% |
BSNL | 110 | 10% | 10% |
Total | 1,084 | 100% | 100% |
Key Statistics for Reliance Jio (Source – Reliance Corporate Announcements)
• Number of subscribers added in 2019 – 90 million
• Percentage of Active Jio subscriber – 71.2%
• Average number of new Jio users per day – 500,000
• Reliance Jio’s market share for mobile service – 6.4%
• Reliance Jio’s market share for broadband service – 23.9%
• Number of cites Reliance Jio’s 4G network covers – 18,000
• Average amount of data consumed by Jio user – 11 GB per month
• Number of Jio Prime registered users – 72 million
• Number of Reliance Jio mobile tower – 100,000
“Jio is India’s only 5G ready network due to its elastic network and deep fiber. It is also expected to gain over 50% revenue market share in the Indian Telecom Sector by 2022”
How Facebook empowering Jio’s eCommerce leadership
Facebook, a social media giant, intends to grab almost a 10% equity stake in Reliance Jio, which caused a situation of stirring in the Indian telecom industry. Also, it led them to be the second-highest stakeholder followed by RIL. The partnership deal was targeted to provide local e-commerce services, which focused on serving over 60 million micro, small, and medium businesses in India informal sector mainly comprises 120 million farmers and 30 million small merchants.
“The most fascinating partnership in India between JioMart (a subsidiary of Jio Platform) and WhatsApp (a subsidiary of Facebook) is focused to regulate the Indian eCommerce and mobile payment sectors. WhatsApp has over 400 million users in Indian territory including a wide number of small business owners. Furthermore, it will give access to them to get a huge network of small convenience shops and assist in the delivery of essential packages during COVID-19” – Inside story of Jio & Facebook Deal