With 13 investors pouring in money left, right and centre over the last 3 months, Reliance Jio has become the most valued Telecom service provider in India. Renowned companies like Facebook and Google have pumped several billions of dollars into Jio. Jio has raised nearly $20 billion investment in the last 3 months from 13 investors. What is the reason behind the investments pouring into Reliance Jio? Why is there so much hype around Jio? This blog post answers some of these questions. There are 8 reasons that I can think of, for the hype around Reliance Jio and the recent investments.
1. Growth in subscribers base
Jio services were publicly launched in 2016. However, in the last 4 years, Jio has added nearly 38.75 crore subscribers. And most of these subscribers are 4G subscribers, who consume a lot of data. Comparing the subscriber base with Airtel - Airtel has just 32.7 crore subscribers (which also includes their broadband customers). Airtel has just 14.2 crore wireless subscribers (which includes 2G, 3G and 4G customers). Needless to say, Jio has secured the top most position in terms of the subscriber base and is the largest telecom service provider in India.
In the recent quarter that ended in March 2020, Jio added 1.75 crore subscribers, while Airtel just added 5.5 lacs subscribers, according to TRAI.
2. Rate of growth of Revenue
Airtel's annual revenue is Rs. 23,722.7 crores, while Jio's annual revenue is Rs. 18,632 crores. Airtel has recently reached an ARPU (Average Revenue Per User) of Rs.154 per month. Jio's ARPU is just Rs.130.6 per month. On a first look at these data, we may think that Airtel is making much more money than Jio - which is true. However, Jio is growing at a rate of 26.3% year-over-year, vs. Airtel which is growing at a rate of 15% year-over-year. The valuation of any company is based on the 'future growth potential', in addition to the 'current performance'. As we may observe, Reliance exhibits amazing growth potential, when compared to Airtel. Future growth potential attracts investors, as they expect to get better Return on Investment (ROI) for their investments.
3. Increased profits
In the recent quarter, Jio's profit was Rs. 2,331 crore whereas Airtel reported a net loss of Rs 5,237 crore. Airtel and Vodafone/Idea has a number of legacy networks (2G/3G) to maintain. However, Jio does not have any baggage - as it started with 4G services. This helps Jio to become more profitable, when compared to the competition.
4. Virtualized Network and Lower Operational Costs
Jio reportedly has 15,000 - 20,000 employees in its payrolls. This is similar to the employees count in Airtel, which has roughly 19,000 employees in its payroll. However the network operating costs of Airtel is Rs 5,201.5 crore when compared to Jio, whose operational costs are just Rs 4,560 crore.
Jio built most of its network infrastructure on top of cloud. Several network functions were virtualised and run on top of telco cloud. Network virtualisation helps service providers to lower their operational costs. Jio's network is a great example. Network virtualisation also helps service providers to upgrade their core network from 4G to 5G, seamlessly.
5. 5G Readiness
Jio acquired Radisys, a vendor who develops products for 4G and 5G networks in 2018. Radisys has nearly 700 employees who are developing products and solutions related to wireless networks. This helps Jio in being prepared for a rollout of the 5G network. In the recent Annual General Meeting (AGM), Mukesh Ambani, the founder of Jio proudly announced that the company is ready to rollout a home-grown 5G network in India. He also mentioned that the technology will be made available for other service providers across the globe, once it is tested in India.
6. Applications & Platforms Ecosystem
Jio has built and rolled out a number of applications / platforms over the last 4 years. For example, there is Jio TV, Jio Chat, Jio Meet, Jio Cloud, Jio News, Jio Cinema, Jio Saavn and Jio Browser. Nearly, 68 crore people in India have access to Internet. The recent investment from Google is to jointly build a smartphone for the masses - specifically to onboard the next 70 crore users to the Internet. Facebook's investment is focused on expanding the reach of Internet by rolling out services like Jio Mart. Through Jio Mart, Reliance Jio is planning to connect customers with the local grocery stores.
While Jio has not yet branded itself as the innovative solution provider in the Indian market, with services such as Jio Glass, there is a possibility for Jio to differentiate itself from the rest of the service providers. Google made several attempts in the past with Google Glass and failed miserably. Only time will tell, how much popular Jio Glass will become.
7. Data localisation policies of India
Several companies such as Facebook, Google and Amazon are facing difficulty in continuing to provide their services in India, due to government's data localisation policies. Government is mandating all of the Over the Top (OTT) companies to maintain the data generated by Indian Internet users, within data centers in India. Jio's partnership will help Internet giants like Facebook and Google to build and maintain data centers in India for data localisation. As Facebook and Google jointly develop products / services for the local market by partnering with Jio, the data gets automatically maintained in the local data centers. Facebook and Google will still have access to all of this data, and they can use this data to customise their offerings for India.
8. India's push for 'Self-reliance' & 'Made in India'
India is openly promoting 'Self-reliance' and 'Made in India' policies - in almost all sectors. If, in the future, Government increases the focus on 'Self-reliance' by blocking applications such as Facebook or Google Search, these vendors can try to influence the government through Jio. Mukesh Ambani enjoys the support and rapport with the current Central Government. He has the power to influence the key decision makers in the country. It helps Facebook and Google to indirectly do the lobbying on government's policies and key decisions.
