 "Reliance to launch Jio by Dec, set to kick off pricing war")
Mukesh Ambani is set to launch his much-delayed telecom business under the brand name Reliance Jio by December. In what could cause some anxiety to Jio’s competitors, the Reliance Industries Ltd (RIL) chairman & managing director said the price of the 4G smartphones could be less than Rs 4,000, and voice and data services could be offered for as low as Rs 300-500 a month.
Jio was well positioned to become a global Tier-I telecom operator, Ambani said at RIL’s 41st annual general meeting in Mumbai on Friday, describing it as “one of the largest transformational greenfield (new) digital initiatives anywhere in the world.”
All of this would be accompanied by a suite of digital music, payments, news and cloud storage services, including access to high-definition television and Bollywood movies.
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Ambani said RIL would invest at least Rs 2 lakh crore in the next 12 to 18 months, half of which would be in digital businesses under Reliance Jio and Reliance Retail.
Analysts were concerned the investment in telecom was going to be an expensive gamble for the company as it was not easy to penetrate the cream (top 30 per cent of customers, who account for an estimated 70 per cent of the industry’s revenue). But Ambani said he was confident that Jio would play a significant role in lifting India from its current 142nd rank in internet penetration and bringing it among the top 10 nations of the world. The crowd cheered these announcements, while Ambani’s wife, Nita, applauded from the stage.
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Analysts said the Jio launch, which was originally expected this month, had been delayed by six months. Jio will operate its network only in a ‘beta’ mode and upgrade to commercial operations around December 2015.
Currently, Jio is present in all 29 states, with direct physical presence in nearly 18,000 cities and towns; the wireless footprint covers 100,000 villages. Its road map is to have 100 per cent national coverage within three years.
Terming Jio more than just telecom services, Ambani said the integrated business strategy ensured Jio was capable of offering a unique combination of telecom, high-speed data, digital commerce, media and payment services.
This April, Jio launched its first mobile application, ‘Jio Chat’, which integrates chat, voice, video calling, conferencing, file sharing and photo sharing, among other things. “In just the first few weeks of operations, Jio Chat now has one million active users, without any paid promotions or overpaid advertisements,” Ambani said.
RIL said Jio, by April next year, would have connected over one million homes through fibre optics, with a capability of scaling up in the top 50 cities of the country. Jio has deployed a network of nearly 250,000 route-kilometres of fibre optics and will more than double this in the last mile over the next three years. Jio is also working on its digital money and digital payment business. “Jio Money will play a crucial role in digitisation of payments in India by offering a platform for ubiquitous, affordable and secure digital payments.”
RIL had this February partnered with State Bank of India to apply for a payments bank licence. Investors, however, were not much impressed with what they heard. The shares of RIL closed 1.36 per cent higher than their previous close on BSE, while the benchmark Sensex rose 0.21 per cent.
Other businesses
Ambani said expansion in petrochemicals was on track and would deliver significant earnings before interest, tax, depreciation and amortisation (Ebitda) growth in coming years. Domestic exploration and production business generated shareholder returns lower than the cost of capital, less than 12-16 per cent assured in other domestic infrastructure sectors like roads, fertilisers and power.
“It’s important to highlight that there is value yet to be unlocked from 5-6 tcf of resources discovered at various stages of development, appraisal and approval,” Ambani said. He added that RIL was “constructively engaged with the government to resolve legacy issues in a timely manner with regard to our rights to cost recovery, gas pricing and other issues to create value for the nation and our shareholders”.
After commissioning a fully automated polyester plant at Silvassa with a capacity of around 400,000 tonnes, RIL has brought on stream 1.15 million tonnes a year of PTA (purified terephthalic acid) capacity.
“We will be ready for start-up of another 1.15 million tonnes a year of PTA capacity at Dahej by October this year. With this, our total PTA capacity will be 4.5 million tonnes a year, making us the fifth-largest PTA producer in the world,” Ambani said.
On the retail business, Ambani said Reliance Retail would roll out a B2B digital marketplace that would enable kiranas to transact online. The fashion and lifestyle formats would roll out their e-commerce portals by the end of the year.
“This year will bring about disruptive shopping experience for consumers. With the advanced internet infrastructure built by Jio and a robust physical retail business built by Reliance Retail, we will create a differentiated e-commerce model for India,” Ambani said.
He also said Reliance would scale up retail presence across its formats from 200 cities to over 900 cities by next year.
- RIL will spend Rs 2 lakh crore in fresh capacities over the next 12-18 months
- Its Rs 1-lakh-crore investments in the previous financial year were the highest by any Indian firm in a year
- Reliance Retail plans to expand retail business from 200 to 900 outlets over next year
- RIL to roll out a differentiated e-commerce model, which will integrate online and offline retail
- Combined retail and e-commerce business to grow 30-50% annually
- The company will revive its entire fuel retail network by the end of FY16
- Its exploration and production business has generated returns on capital lower than the cost of capital