In November 2019, when Mukesh Ambani, Asia’s richest and the world’s fourth-richest person and chairman and managing director of Reliance Industries Ltd (RIL), created Jio Platforms, a wholly-owned subsidiary of his oil-to-telecom empire, he set in motion a plan that would drive his company’s growth over the next decade.
Jio Platforms acquired Reliance’s telecom arm, Jio Infocomm, and with that India’s largest company by market capitalization metamorphosed its telecom venture into a digital company.
Simply put, Jio Platforms is Reliance’s digital arm that houses its telecom and digital offerings. However, it is the linchpin for Mukesh Ambani’s ambition to create a digital society, the key for RIL to get a majority of its revenue from consumer businesses that currently contribute about 30%. This will help the group reduce its dependency on the oil business, which has been going through turbulence due to macro-economic situations in the last few years.
At the center of Jio Platforms is Jio Infocomm with its almost 400 million subscribers, which is what makes the digital venture so valuable. The network connectivity is the basic foundation for offering digital services to millions of Indians. Through its telecom arm, the company offers wireless, home broadband, and enterprise broadband services.
“Jio Infocomm is the bedrock of the entire Jio structure,” Sanchit Vir Gogia, founder and chief executive, Greyhound Research, told KrASIA. “Without Jio Infocomm, Jio Platforms is nothing but an empty drum without subscribers.”
According to Jayanth Kolla, founder and partner of Bengaluru based business consultancy firm Convergence Catalyst, Jio Infocomm strategically brings a huge customer base to Jio Platforms and gives it a whole lot of data analysis on the usage pattern and behavior of these consumers.
This, in turn, he said, “acts as a tool for the company to change or impact the digital behavior of consumers.”
Apart from connectivity services, Jio Platforms inherited tech capabilities that Reliance had accumulated over the last few years. These include artificial intelligence, machine learning, internet of things, cloud computing, blockchain, edge computing, computer vision, security solutions, and mixed reality.
A network of about 20 startups that Reliance has acquired or invested in, also bring with them cutting edge technologies that add to Jio Platforms’ eye-popping list of tech capabilities. These tech startups are helping the company enhance and expand its core digital products and services, as well as launch new tech products and platforms.
Lastly, Jio Platforms has an ecosystem of apps that provides digital services across segments such as communication, video, music, gaming and entertainment, home solutions, security, and health, among others.
The ultimate aim of Jio Platforms is to offer “anything and everything digital,” according to Kolla.
“Be it broadband, mobile internet, TV, online retail, communication, or digital payments, they have made it clear they want to be the digital player in every Indian’s life,” he said. “Every mobile and consumer internet product from China to California, Jio may launch an India version of all of them.”
There is already consensus building in the global tech community on the trend of ‘splinternet’–where the internet is being broken into various geographical regions based on factors such as politics, technology, commerce, and nationalism, among others. The theory argues the Indian version of the internet is likely to be led by Reliance Jio. This essentially means the internet-based consumer services are likely to be dominated by Reliance’s digital baby.
However, according to Gogia, Jio Platforms is not just a digital story, it is a “phygital story,” or physical plus digital story, using technology to connect the offline and online retail experience.
“How the company can get more out of its underutilized offline assets such as Reliance Retail (its retail arm) and other related investments, is what the story is all about,” he said.
Mukesh Ambani’s ambitious e-commerce venture, Jiomart, is a prominent step toward achieving that. Reliance is leveraging its humongous retail and wholesale outlet network in the country to expand Jiomart and compete with Amazon and Flipkart.
The long complicated history
That Mukesh Ambani set up a telecom company because of his daughter Isha Ambani is a famous story that has been told numerous times.
“The idea of Jio was first seeded by my daughter, Isha, in 2011,” Mukesh Ambani told an audience in London in March 2018 after receiving the Financial Times-ArcelorMittal award for boldness in business.
Then a student at Yale, Isha Ambani was back home on vacation and was having a hard time submitting her coursework because of poor internet connection. She told senior Ambani that “the internet in our house sucks,” which prompted Mukesh Ambani to set up a fast-speed, low-cost internet five years later.
Be that as it may, Mukesh Ambani’s telecom ambitions, in fact, go over a decade back. The Reliance group first entered the telecom business with Reliance Infocomm in 2002, soon after the death of its founder Dhirubhai Ambani. However, by then a cold war had broken out between his sons, Mukesh Ambani and Anil Ambani.
Three years later, unable to run the Reliance empire together, the brothers split up, ending a long-standing public feud. It was their mother, Kokilaben Ambani, who divided the business between the two. While Mukesh Ambani took reins of the exploration and production, petrochemicals, and refineries and marketing under the group’s original name Reliance Industries, Anil Ambani got Reliance Energy, Reliance Infocomm, and Reliance Capital, and named his company Reliance-Anil Dhirubhai Ambani Group (R-Adag).
Read this: Making sense of Reliance-owned Jio Platforms’ fundraising spree
In January 2006, Ambani brothers signed a 10-year non-compete contract so as to avoid rubbing each other the wrong way.
By 2008, the telecom arm of R-Adag, Reliance Communications, had emerged as the country’s second-largest mobile operator. Anil Ambani was then working on a mega-deal between Reliance Communications and South African telecom giant MTN that would have formed a powerful global telecommunications firm spanning India and South Africa with nearly USD 70-80 billion in value. But the talks between the two companies were called off after Mukesh Ambani interfered and challenged his brother’s right to sell his controlling shares to MTN as a part of the deal. He claimed he had the first right of refusal as per the complex arrangement brokered when the Reliance empire was split up.
To put an end to the dissent, in May 2010, the two brothers scrapped their non-compete agreement, which gave Mukesh Ambani the ticket to enter the telecom sector.
Two weeks later, RIL bought a 95% stake in Infotel Broadband Services, an unknown and the only company to have won the auction of broadband spectrum for pan-India. Interestingly, the USD 1-billion-deal was made public hours after the auction results were announced.
Unless these past events were a series of serendipitous coincidences, Mukesh Ambani had been planning his entry in the telecom sector all along, even before his daughter complained about the poor connectivity.
In 2013, RIL renamed Infotel Broadband Services as Reliance Jio Infocomm, which then became the only company to have a pan-India broadband spectrum, which it later used to roll out 4G services. To be sure, it took Reliance about six years to launch commercial mobile network services. But once it commercially launched in September 2016, it took the market by storm.
Not just a telecom story
When Mukesh Ambani unveiled Jio in 2016, he announced Jio’s data, voice and video call, and the bouquet of Jio applications and content (including JioTV, JioCinema, and JioMusic, among others) would be available for free till the year-end. Later, the offer was extended till March 2017.
Over the next three years, Reliance offered Jio services and 4G smartphones at dirt-cheap prices, which helped it oust the incumbents and become the largest telecom operator with over 330 million subscribers in mid-2019.
In the meantime, the company was getting ready for the next phase of growth. To beef up its tech capabilities, between July 2016 and August 2019, Reliance acquired stakes in 18 companies in areas including artificial intelligence, media, entertainment, software simulation, logistics, and music streaming.
To carve out Jio Infocomm as a standalone digital connectivity platform, in March 2019, Reliance demerged its tower and fiber infrastructure assets from its telecom arm. Later that year, this new asset-light entity laid the foundation for Jio Platforms.
Thus, Mukesh Ambani strategically transformed his telecom venture into a full-fledged digital tech platform, which during an ongoing pandemic raised over USD 20 billion from global high-profile investors including tech giants like Facebook and Google. In fact, unlike other Indian telecom giants, Airtel and Vodafone-Idea, Reliance never considered Jio as just a telecom venture.
While launching Jio in 2016, Mukesh Ambani called Reliance Jio as the group’s “digital services initiative.”
“It is the difference in thinking. It is the same reason why AT&T and Verizon (US telecom behemoths) have not become tech giants like Google and Facebook,” Kolla said. “The basic thinking of consumer internet companies is how they can scale 10x or 100x, rather than 10-20% incremental growth. And that is what telcos around the world lack.”
This is exactly what Jio had from the very beginning—the vision to scale up its services to a billion Indians. And now it is also eyeing millions of enterprises, especially small merchants across India.
But more importantly, experts believe, the confidence from institutional and retail investors that Reliance enjoys, its presence across industries, and the ability to work with the government, is what is going to take Jio Platforms long way, whose evolution has just begun.