Reliance JIO – A New (& Younger) Era Dawns as Next Gen Takes Over

Akash’s elevation comes at a time when Reliance Jio is gearing up for the 5G spectrum race and an initial public offering (IPO). There are many new challenges ahead  but experts point to the massive success of Jio over the last 6 years

In June 2022, when the Reliance Board approved the appointment of Akash Ambani, as Chairman of Reliance Jio Infocomm Ltd and accepted the stepping down of Mukesh Ambani from the post it ensured handing over the reins of the nearly $12 billion (Rs 80,000 crores) Reliance Jio in a seamless and smooth manner to the next generation of leaders.

For close watchers of the Group, this offered a bit of a flashback to the year 2002, twenty years ago, when Dhirubhai Ambani, the founder and visionary of Reliance Industries Limited (RIL) passed away.

A dispute arose between both his sons Mukesh and Anil Ambani, primarily over the rights of inheritance and control of the best parts of the Reliance Empire – then primarily a Petrochemical and Oil giant which had started to take make strong entries into Telecommunications, Life Sciences, and other emerging areas.

According to global investment firm Alliance Bernstein, the JIO subscriber base is expected to grow at a 2% CAGR from FY22 to FY24 and ARPU is expected to improve to Rs 189 from the current Rs 153 by FY 23 driven by more customers and potential tariff hikes.

The next generation is thus stepping into senior leadership positions at the $300-billion + (`20 lakh crore) RIL empire.

JIO & AKASH

According to industry sources, Akash, 30, who is the eldest son of Mukesh and Nita Ambani, was actively involved in conceptualising the idea of Jio, and over the last several years, in building up Reliance Jio Infocomm in his role as a Board member and non-executive director.

An alumnus of Brown University in Rhode Island, USA, Akash has majored in Economics. In 2020, he was made the non-executive director of the company. Subsequently, he led the key deal between Reliance Jio and the social media giant, Meta (then Facebook), where the latter picked up a 9.99 percent stake in Jio Platforms, the holding company of JIO, for a whopping $5.7 billion. Akash was also closely involved with conceptualising and launching Jio Phones, which quickly gained traction in the market.

“In 2021, Akash played a very key role in Google’s $4.5-billion investment in Jio Platforms for a 7.73 percent stake. Currently, he is helping JIO in its 5G journey,” said a source.

Akash’s elevation comes at a time when Reliance Jio is gearing up for the 5G spectrum race and an initial public offering (IPO). There are many new challenges ahead of him but experts point to the massive success Jio has had over the last 6 years.

India’s digital market opportunity is slated to grow 4-5x to $1trillion by FY25, as per a MeiTY study. The Covid-19 pandemic has further accelerated data consumption due to virtual working, virtual classrooms, and the adoption of digital apps.

Disrupting telecom

In 2016, JIO played a disruptive role in the telecom space. Until then access to broadband was limited to top-tier users. Since Jio’s launch, India’s mobile broadband subscriber base has crossed over 700 million and data consumption has skyrocketed to over 17 GB per user per month. A combination of innovative services, cheap tariffs, and bundling of affordable handsets has catapulted Jio into the largest operator in the country.

This comes at a time when India is charging ahead on the digital roadmap. From government services to banking, e-commerce, e-learning to entertainment, Indian citizens are using digital tools to access services and products.

With over a billion mobile subscriptions, India is one of the largest markets globally. Smartphone penetration is also on a steady rise, led by the availability of affordable phones with best-in-class features. The current smartphone base stands at 600 million while the total number of internet users, as per TRAI, has risen to 765 million. This large base of smartphone and internet users provides a platform for rapid growth in digital services and potential opportunities for telcos to move up the value chain.

India’s digital market opportunity is slated to grow 4-5x to $1trillion by FY25, as per a MeiTY study. The Covid-19 pandemic has further accelerated data consumption due to virtual working, virtual classrooms and adoption of digital apps. Telcos are eyeing this opportunity and have been collaborating with other digital ecosystem players/ digital apps to expand their offerings, and hence, strengthen consumer stickiness. “Jio clearly leads other telcos in the effort to monetise digital opportunities due to:

a) its large +416 million telecom subscriber base and stakes in some of the largest consumer digital platforms;

The Adani Group is building its own digital platforms, encompassing super apps, edge data centers, and industry command and control centers.

b) network effects due to a large number of apps, which increases subscriber stickiness within the ecosystem and enables cross-selling of solutions; and

c) an efficient business structure that clearly allows for the demarcation of the core connectivity business and the additional digital businesses.

In addition, Jio’s B2C approach provides a wider moat to monetize this huge digital potential given there is no exclusivity in the partnership-based B2B2C business model followed by other telcos,” say analysts at JM Financial in a research report.

The Road Ahead

Reliance Jio Infocomm is one of the four key growth business segments of Reliance Industries (RIL), the others being retail, Oil to Chemicals (O2C), and new energy (which includes renewables like solar, wind, and the most recent Hydrogen).

According to the report by global investment firm Alliance Bernstein (AB), dated 29 June 2022, Reliance Industries is expected to outperform in all its segments. A focused look into Reliance Jio is where we will get to see the acumen of Akash at work. According to Bernstein, the JIO subscriber base is expected to grow at a 2% CAGR from FY22 to FY24. ARPU is expected to improve to Rs 189 by FY 23 from the current Rs 153, this is driven by high data demand, 4G upgrades, and potential tariff hikes. The broadband subscriber base is expected to grow by 48% between FY 22 and 24, driven by strong demand for high-speed internet, led by the increasing availability of fiber connections.

So while the Jio momentum is likely to continue, new factors will emerge in the rapidly changing digital and mobile sectors that won’t make it smooth sailing yet, for Akash.

One such unexpected factor has just emerged in the high-speed mobile 5G Networks and Services race with the Adani Group throwing its hat into the ring.

“As India prepares to roll out next-generation 5G services through this auction, we are one of the many applicants participating in the open bidding process,” said a Media Statement released by the Adani Group.

RIL had done several tuck-in acquisitions to increase its capabilities in AI/IoT like Radysis (open source telecom solutions enabling next-generation technologies) and Haptik (conversational AI platform). Currently, these are being used forB2B applications.

The statement further continued, “We are participating in the 5G spectrum auction to provide private network solutions along with enhanced cyber security in the airport, ports & logistics, power generation, transmission, distribution, and various manufacturing operations.” The Statement also clarified, that “if we are awarded 5G spectrum in the open bidding, it will also align with our recent announcement of significantly increasing the Adani Foundation’s investments in Education, Healthcare and Skill Development in rural areas, each of which stands to benefit from 5G technology.”

The Adani Group is building its own digital platforms, encompassing super apps, edge data centers, industry command, and control centers – which mirror and even rival those of Reliance Jio in many areas.

For these and other new digital businesses, the statement says: “will require ultra-high quality data streaming capabilities through a high frequency and low latency 5G network across all our businesses.”

Analysts though, expect that Adani may still be able to offer commercial services by applying for a unified access license in the future. According to analysts at brokerage firm Jefferies, Adani could take out a leaf from Jio’s entry in telecom some years ago.

RIL’s 4G foray started in 2010 after its takeover of Infotel Broadband which held an ISP license and had acquired 2300MHz spectrum in the 2010 4G spectrum auctions.

RIL’s 4G foray started in 2010 after its takeover of Infotel Broadband which held an ISP license and had acquired 2300MHz spectrum in the 2010 4G spectrum auctions.

In 2013, the Govt. opened fresh applications for new unified licenses. RIL applied for this by paying a Rs 17 billion (1700 crore) fee and was granted this license in late 2013. This enabled Jio to offer interconnected voice services on any spectrum including the 2300MHz band.

It launched its network three years later in 2016. “While Adani intends to buy spectrum in auctions only for private use, they can offer commercial services in the future by obtaining a unified License, as the services an entity can offer depends on the license held. RIL also had to obtain a Unified License in 2013 to be able to offer full connectivity services,” says a report from Jefferies.

New players on the horizon

In addition to Adani group’s potential entry into the 5G space, the other major challenge for Jio and Akash would be to retain the Enterprise businesses and the private network space. Alongside the 5G spectrum auction for telcos on 26 July 2022, the government has issued guidelines for any Enterprise to set up their own Captive Non-Public Network (CNPN). The CNPN License itself will not require any payment of License Fee or Entry Fee. Setting up the captive network, however, will require Spectrum, which can be used by the Enterprise by leasing out from a mobile operator who has that Spectrum or requesting the operator to build them a network.

CNPN Licensees can also obtain their own frequencies at terms that are yet to be determined by the TRAI. One way or another both these options would eat into Jio’s 5G revenues – as Enterprise customers constitute almost 40% of a Telcos revenues.

Furthermore, the allocation of direct 5G spectrum for private networks allows other global, large technology companies like Amazon, TCS, or Google to enter into the enterprise services segment.

Analysts expect Jio to navigate through these challenges – primarily because it is way ahead in the game today. Jio has evolved from a pure-play telecom provider to a tech enabler, through its Jio Platforms play. Currently, Jio Platforms (a standalone entity) houses the Enterprise and consumer suite of apps as well as the infrastructure business of Jio’s payment app (design, development, and operation of the app).

The Jio platform currently has two major Video-on-Demand (VOD) platforms, namely JioTV and Jio Cinema. JioTV is a content aggregator app for Live TV channels while Jio Cinema aggregates movies. Also, Jio Fibre users have access to JioTV+, an app that aggregates content across OTT platforms. At present, Jio does not charge for these apps and they are being used to give additional benefits to Jio customers so as to retain them. Jio has already aggressively positioned itself in the carriage space, with its captive user base and investment in leading Cable TV companies (Den, Hathway, and GTPL Hathway).

Even in the content space, Jio has invested in content producers such as Balaji Telefilms, EROS, and Roy Kapoor Films and has also signed non-exclusive content deals with marquee Indian and foreign players.

RIL had done several tuck-in acquisitions to increase its capabilities in AI/IoT like Radysis (open source telecom solutions enabling next-generation technologies) and Haptik (conversational AI platform). Currently, these are being used forB2B applications; for example, the Haptik chatbot was used by the Governments’ Corona helpdesk earlier during the peak of the Pandemic.

However, many of these acquisitions could be leveraged for consumer applications, giving Jio an edge in consumer IoT.

All in all, Akash Ambani has a great runway for take-off and though he will encounter air pockets of turbulence in the Digital Game, the momentum and deep knowledge within the Group (not least of which is handling hundreds of millions of customers) will be a huge tailwind to propel Jio into the next era.

By Jose JN, Aanchal Ghatak & Voice&Data Bureau

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