Can Mukesh Ambani’s Jio become a Verizon or AT&T with new business?

Reliance Jio chief Mukesh Ambani is targeting to become a total telecom operator with the new initiatives announced today.
Mukesh Ambani at RIL AGM in 2019
The richest Indian took less than 33 months to create the second largest telecom operator in the world — in a single country — with 340 mobile subscribers. The largest telecom operator is China Mobile. The largest telecom operator group is Vodafone with presence in several countries including India.

Reliance Jio presently focuses on mobile communication business for retail customers. Jio is like a T-Mobile US at present with mobile services. Jio will start its broadband business next month – three years after building the 4G venture in India.

Reliance Jio will have a strong enterprise business in 2020 onwards though the fiber Internet business will also be targeting enterprise customers.

The entry into additional two business divisions will equip Reliance Jio to take on Sunil Mittal-promoted Bharti Airtel, the largest operator in India in terms of revenue. Bharti Airtel is not facing challenges from Reliance Jio, according to Fitch Ratings, and it will retain 30-33 percent revenue share in the Indian mobile services market.

Mukesh Ambani’s Reliance Jio will be able to try to achieve revenue of AT&T and Verizon Communications, two leading telecom operators in the world. AT&T and Verizon strong have presence in wireless, wireline and entertainment business areas.

The annual revenue of AT&T in 2018 was $170.756 billion, a 6.36 percent increase from 2017. The revenue of Verizon in 2018 was $130.863 billion, a 3.83 percent increase from 2017. China Mobile has posted $104.400 billion revenue in 2018.

Revenue streams for Jio

Jio has a customer base of 340 million users on its 4G network in India. Jio is more than 10 million new customers each month. Mukesh Ambani is not concerned about the low-ARPU customers who are shifting from Vodafone Idea or Airtel India or BSNL. In fact, nearly 20 percent of Jio’s 340 million customers are inactive.

Mukesh Ambani is claiming that Reliance Jio has already invested 3.5 lakh crore or $50 billion towards creating a digital infrastructure across India, with the largest optical fiber footprint. Samsung and Cisco are some of the vendors to Reliance Jio.

We believe that telecom network makers such as Samsung, Cisco, Nokia, among others, have not reported significant revenue from deals with Reliance Jio. In fact, Samsung does not even mention about its telecom network business growth in India in its latest annual reports.

Mukesh Ambani’s Jio will make money after the divestment of hard infrastructure worth 1.17 lakh crore or $25 billion into separate infrastructure investment trusts or InvITs to monetize and unlock value from assets.

“The investment cycle for Jio is now complete. Only marginal investments in access are now required to grow capacity to meet growing demand. This gives us tremendous operating leverage and superior returns on investments,” Mukesh Ambani said.

Mukesh Ambani said that these investments are legacy-free, fixed-mobile converged future-proof assets. This means that Jio can start launching 5G without spending much on adding on 5G infrastructure. This also means that Jio will not have big 5G network contracts. T-Mobile US last year signed two 5G contracts worth $3.5 billion each. This indicates that Reliance Jio will make further savings.

Reliance Jio will focus on Internet of Things (NBIoT), home broadband, enterprise broadband and broadband for SMEs across India. Jio will start generating revenue from these new business areas during the current financial year itself.

The Jio Fiber plans will come bundled with a landline phone connection that offers free voice calls for lifetime at no additional cost. Jio will have a Rs 500 per month calling pack enabling customers to make free international calling to the US and Canada.

Reliance Jio will not take much time to become the number one telecom operator in India in terms of revenue as well. Sunil Mittal’s Airtel has the backing of Singapore-based Singtel to look for more investments to speed up network and add customers. Aditya Birla Group’s Kumar Mangalam Birla has the investment support from Vodafone.

Baburajan K