Ambani Forking $4.4 Billion More Into Jio
Hungry for growth, and ambitious as they come, the network is going to be one big mouth to feed, for a while to come.
After having poured USD 25 billion into starting a national fourth-generation mobile network, India’s richest man isn’t done yet.
Mukesh Ambani is investing more money — about USD 4.4 billion of it to be precise, into boosting Jio’s network coverage in the face of continued congestion problems being reported from everywhere, and to enable some more marketing initiatives.
Just a few months old, the telecom network has already racked up more than 72.4 million subscribers — it’s been the fastest growth ever seen from any operator in the country so far. And it’s not really abating — Jio is luring about 600,000 new customers a day to its network.
To boost the capacity of this rapidly-expanding network, Reliance plans to raise INR 30,000 crore (roughly USD 4.4 billion) from a rights offer. This new investment would help them not only boost their network capacity but also challenge the other players in the market with more freebies to offer.
Ever since Jio hit the market in a commercial launch in September 2016, the company has been the center of much skepticism and criticism. They first came with a 90-day free trial offer, offering unlimited free internet and voice calling to anyone who subscribed. This offer was then extended up 30th of March, 2017, after which the planned tariff would be levied.
“Reliance clearly doesn’t want to be a small player, but wants to be №1 and to be №1, you need to invest lots of money”, said Anthea Lai, an analyst at Bloomberg Intelligence. “For sure, the other operators are struggling, but you need a disruptor to shake things up”.
The company has also been facing terrible network congestion. In the early day of the roll-out, upwards of 50–60% calls dropped or failed to connect. While it has now come down to about 20% calls over the last few days, the misadventure has left a bad taste for almost everybody involved — Jio, it’s customers, other telecom operators, and even the regulatory body in India, the Telecom Regulatory Authority of India.
The numbers declined only after lengthy and extremely public spats between Jio, Airtel, Vodafone, and Idea — the current top-3 leading telecom operators in India. The disagreement even got to a point of a penalty of INR 3,050 crores (~ USD 45 million) being levied on the trio for supposedly failing to provide enough ‘points of interconnection’ to Jio’s network.
Further developments in this regard will unfold later in February, as a case filed by Airtel regarding how Jio’s freebies are killing the market would be heard in court.
As far as Ambani’s plans are concerned, this new investment seems like his attempt to diversify Reliance, which reportedly made about 98% of its profits from oil and petrochemicals last year. As part of the current fundraising, Jio plans to issue 6 billion, 9%, non-cumulative, optionally convertible preference shares of INR 10 each at a premium of INR 40, which would lead to a large influx of money for Jio’s disposal.
“Having already made most of the investments in building out the network, Jio is probably spending this money on customer acquisition and some last-mile connectivity”, said Deven Choksey, managing director of Mumbai-based brokerage K.R. Choksey Shares & Securities Pvt., said to Bloomberg. “They’re still capitalizing the company, as this is probably the first such startup in the world”.
Reliance is set to announce the company’s third-quarter returns this week. All eyes will be on the company’s statement, and Jio’s part in it, with the idea of looking forward to what plans Ambani might have for Jio from now on.
All said and done, Jio has set many ripples in the water, however since it has to wade the same waters itself, one would think it’ll learn to swim instead of splashing around.
Originally published at Chip-Monks.
