Reliance Jio: World's First 'Super Operator'?

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Jul 16, 2020

In the world's second largest mobile market, Reliance Jio, India's leading Communication Service Provider (CSP) or mobile operator, has taken the entire global ICT industry by storm with its vision and the most successful "serial" fund-raising over the last eight weeks. Reliance Group Chairman Mukesh Ambani (world's sixth richest man with a net worth of $72 billion), with the launch of greenfield 4G network Jio in 2016, changed the entire competitive and technology landscape in India, amassing close to 400 million 4G subscriptions.

India went from 14 operators down to 4, with two out of the remaining four already on a life support and a third one reeling under debt, instantly offering Reliance Jio a monopoly position. A monopoly position married with serious money muscle and a clairvoyant vision to build a digital platform to empower and democratize technology in a country of 1.3 billion people, making it the most attractive company for any investor or stakeholder to partner with. It is called Jio Platforms.

Jio Platforms Needed Strategic Partnerships to Cross the Chasm

Jio, while amassing a healthy base of 4G subscribers consuming almost 13GB per month, has been still generating an ARPU of less than $2 per user. But to create stickiness, it has also build a platform full of services spanning Content, Commerce, Cloud and Communication, the four key pillars of any consumer's digital lives. Jio has also vertical ambitions of own-branded devices and in-house development of network and data center elements as it already generated to much scale and has a strong buying power against suppliers. Having said that, the deeper capability, reach, execution and adoption of some of these OTT apps and services has been behind as it competes with bigger rivals. This has also led to Jio going in for acquisitions and a partnership route over the last year or so to help it build, integrate and execute this vision for  its 400 million subscribers, tens of millions of businesses, hundreds of millions of households and beyond. There have been significant gaps in its platform's capabilities to help push digital platform services and applications over the chasm. Though the vision is still great but needed investments and partnerships with scale and tech know-how. The slider graphic at the end of the post highlights the breadth of Jio Platforms but the capability to execute and adopt has been low to moderate.

$20 Billion Investments in Jio Platforms in Eight Weeks

With the world reeling with the COVID-19 pandemic, the demand for operator services has shot up, offering the right moment for Jio to announce a series of investments cum partnerships from the biggest technology companies such as Facebook, Google, Intel and Qualcomm, and investors such as Silver Lake, KKR, Vista, Saudi Arabia's PIF, General Atlantic and TPG, which it has been working on for several months. Reliance raised $20 billion in just eight weeks, selling close to 33% stake, as valuation of Jio Platforms climbed to $60 billion, giving it the best funding round ever for any technology company. With this money, Jio has cleared all its debts, which include more than $11 billion to build its 4G network. The end-result: Jio Platforms is now debt-free, well-funded, has a clear vision and the monopoly status to become a 'Super Operator'.

'Super Operator'

We believe Reliance Jio or Jio Platforms is transforming into a Super Operator which is no longer a dumb pipe. With a platform approach, it is laying a strong foundation to play a key role across the users' digital lives and businesses' digital transformation journeys. None of the operators we can think of globally promises to build, offer and control what Jio is capable of.

Jio's strategic partnerships with key companies such as Facebook, Google and Microsoft, the three biggest tech giants, will help it drive Commerce, Communication and Cloud areas, respectively, where it had been weak in terms of capabilities, reach and adoption. Further, acquisitions such as Haptik (AI voice Assistants), Embibe (Education Content Platform), Reverie (Multiple Language Integration), Savvn (Music Streaming),  Tesserect (AR/VR) and Radisys (Network Stack) bridge many capability gaps to foster in the upcoming 5G era.

With 5G around the corner, Jio can lay out a fully-controlled greenfield network to build the software stack via Radisys in fixed as well as wireless networks. It remains to be seen if there are any other big moves on the Radio Access Network (RAN) hardware side or it will depend on the long-term partner Samsung.

With Google, Jio aims to democratize 5G hardware with plans to offer the most affordable 5G Android smartphone in the market with the OS specially optimized for a low-cost 5G Jio smartphone. We estimate this to soft launch in Q4 2021 and proliferate through 2022 and 2023 with a target price point of sub-$100.

This is how the portfolio vs capability graphic looks with investments, partnerships and acquisitions to make the company a Super Operator. Though all eyes will be on Jio over the next five years on how it builds on its vision and helps generate great ROI for the investors and partners once it goes public and beyond the Indian shores.

For more details on what Reliance Jio announced, from its latest partnerships to new offerings from video conferencing to AR/VR headsets to e-commerce platform and more, follow the upcoming post here.

Summary

Published

Jul 16, 2020

Author

Neil Shah

Neil is a sought-after frequently-quoted Industry Analyst with a wide spectrum of rich multifunctional experience. He is a knowledgeable, adept, and accomplished strategist. In the last 18 years he has offered expert strategic advice that has been highly regarded across different industries especially in telecom. Prior to Counterpoint, Neil worked at Strategy Analytics as a Senior Analyst (Telecom). Neil also had an opportunity to work with Philips Electronics in multiple roles. He is also an IEEE Certified Wireless Professional with a Master of Science (Telecommunications & Business) from the University of Maryland, College Park, USA.

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