 "RIL Chairman Mukesh Ambani with his son, Akash. Pic: Kamlesh Pednekar")
Reliance Jio would generate a very "healthy return" on capital, despite the 2.5-lakh-crore investment and the lowest tariff rates for data in the Indian market, Reliance Industries Limited (RIL) Chairman Mukesh Ambani told The Economic Times in an interview.
According to the financial daily, Ambani, in a bid to reassure investors, said, "I can assure that we are not going to lose money. We are not looking to make a killing, but we are looking to make a high-teens return on our capital, which is 18-19 per cent return on our capital, over the investment period."
Investor sentiment
On September 1, the day of the 42nd annual general meeting where Jio was launched, RIL ended 2.7 per cent lower at Rs 1,029, after hitting intra-day high of Rs 1,073 on the BSE.
Shares of teleco majors Bharti Airtel, Idea Cellular and Reliance Communication had also tanked over Jio's launch.
Ambani tried to assure investors that there was no need to worry. Referring to RIL's performance in the last 40 years, the report said, he highlighted that it has delivered a compounded annual growth rate of shareholder return in excess of 20 per cent. The report added that Ambani asked for patience on the part of the investors. "I think most of our serious investors understand this," he told the financial daily.
Break even
On the topic of the numbers that RIL would need to break even, S P Tulsian of sptulsian.com, as reported earlier, said: "Unless and until the company has 120 million subscribers with average billing of Rs 500 per month, when it will have a top line of Rs 72,000 crore, it might not be able to break even. I have my doubts that Jio will have 120 million customers in the first full year of operations, FY18. Given the high depreciation and interest costs, it is most likely to post losses in both FY17 and FY18."
Ambani, speaking to ET, said that Jio was aiming for a single-digit share, or 100 million users, of the country's connected population to begin with.
Other telecos and the sector
Incumbent operators have so far refused to grant interconnect bandwidth to Jio, as the latter had expanded the scope of its trial to millions of subscribers.
In fact, all operators have refused to release additional interconnect bandwidth to Jio.
Ambani told the financial daily that the concerned telecos were reputed business houses and were expected to comply with the existing rules.
Under licence conditions, incumbent operators are mandated by law to release points of interconnect (PoIs).
According to the ET interview, the top telecos have informed the Prime Minister's Office (PMO) that they do not have the required network or the financial resources to provide more PoIs to Jio.
Their contention, the report said, is that meeting Jio's request would mean having to terminate large volumes of potentially asymmetric voice traffic originating from the new comer.
As reported earlier, a senior officer with a telecom service provider told Business Standard: "Given this situation of a purported test that has now been called a commercial launch with free calls being allowed is a very difficult situation."
However, Ambani sees these contentions to be excuses.
"You are supposed to augment interconnect when the current capacity utilisation reaches 70 per cent . You cannot use excuses that someone is doing promotions, capacity requirement has gone up, etc. Those are not acceptable," Ambani told ET.
The Telecom Regulatory Authority of India has called both Jio and incumbents for a meeting to discuss the issue later this week.
However, sources have indicated to Business Standard that the matter could end up in court.
Ambani, in his interview to ET, also hit out at the manner in which the Cellular Operators Association of India (COAI) functions. in fact, the telecos had communicated their unwillingness to indulge Jio to the PMO through a letter from COAI.
In the interview, Ambani said, "I didn't realise until just a few months ago that while it's an association, the voting rights of the members depend on the revenue of the operators. We have zero revenue, so we are crowded out... While it is the COAI, its view is actually the view of one or two operators and not the view of the entire industry."
