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Reliance Jio Infocomm Limited

Reliance Jio disrupted the telecom sector when it launched its services in September 2016, triggering a wave of consolidation in one of the world’s most crowded telecom markets. Perhaps some credit can be attributed to Jio for the turn of events.

For post Jio’s entry, major players saw a huge reduction in revenue, Bharti Airtel (Rs 1124.23 crore), Idea (Rs 529.28 crore), Vodaphone (Rs 524.54 crore), and BSNL (Rs 694.42) in 4Q16 soon after the introduction of Reliance JIO free services; Idea and Vodafone announced a merger, Tata group’s wireless phone business and Telenor were acquired by Bharti Airtel; and Aircel went on record to say that they filed an application under Section 10 of the Insolvency and Bankruptcy Code 2016 for undertaking Corporate Insolvency Resolution Process for the respective companies: Aircel Cellular, Dishnet Wireless, and Aircel Limited, as a result of the disruptive entry of Jio and the failed attempt of combining wireless operations of Aircel and Reliance Communications Limited on account of legal and regulatory uncertainties (and also the unsuccessful aim to restructure its debt amounting to Rs 155 billion). RCom itself later sold its wireless assets to Jio.

Jio’s entire approach was one of market disruption. Its three-pronged focus on broadband networks, affordable smartphones, and the availability of rich content and applications enabled Jio to create an integrated business strategy from the very beginning.

The various strategies adopted by Reliance Jio to capture the Indian market included free voice, apps, SMS, and data initially, which pulled 100 million subscribers within 170 days; bundled entertainment of apps; huge investment in physical advertisements like flyers and posters in most of the parts of the country, sponsorship of events like Indian Super League; low-cost mobile phones; new and very affordable pricing strategies, traditional pricing strategies were having 12 billing cycles (recharges) but it got reduced to about three to four billing cycles (recharges); free voice calls, free roaming and 100 SMS per day; plans like 84 GB data for 84 days at Rs 399 as against the prevalent 1 GB data for Rs 190. High-speed data was now a commodity.

The telco’s operational strategy was equally aggressive. Extensive construction of towers, forging agreements with towercos, laying extensive fiber backhaul, and last mile fiber connectivity; construction of international networks like Bay of Bengal Gateway; and investment in licenses and spectrum were the initial steps. Technological advancements like voice over long term evolution and the vision for upgrades like 5G so that it is prepared for future development innovation like progress to 5G with negligible extra capital use in systems were part of the process technology. The company’s distribution strategy included more margins and schemes to distributors and retailers, fast and digital SIM activations through eKYC, and 4G smartphones and other merchant devices for retailers to start business.

The stage had been set very early to make available high-speed data to every Indian at the most affordable rates, with zero call charge forever.

2017-18 marked the commencement of commercial operations of Jio.  In its very first year of commercial operations, the digital services business recorded revenues of Rs 23,916 crore, with year-end subscribers base at 186.6 million. Reliance Jio reported strong financial performance for the year despite competitive pressures with net profit at Rs 723 crore . Segment EBIT was at Rs 3174 crore for the year, with EBIT margin of 13.3 percent. Depreciation, including depletion and amortization was higher by 43.4 percent to Rs 16,706 crore as compared to Rs 11,646 crore in the previous year, primarily on account commencement of wireless service business in Reliance Jio. Each Jio subscriber on an average consumes 9.7 GB data, 716 minutes of voice calls, and 13.8 hours of video per month.

Jio’s end-to-end all-IP network is the most differentiated network with functionalities such as SDN and NFV, and has been consistently rated as the fastest network in India by TRAI’s MySpeed application over the last 15 months. Jio’s average download speed of 17.9 Mbps is more than twice the network speed available on any other network. Jio has also been consistently rated to have the widest LTE coverage in the country. During FY 2017-18, it continued expanding the 4G network coverage, and further deepening in existing areas to achieve a 99 percent population coverage.

Jio is constantly striving to enrich the digital experience of its customers through innovative applications developed in-house, or in collaboration with the unique ecosystem of small and large partners.

Making life better for everyone. Jio offers its subscribers unique content such as PyeongChang 2018 Olympic Winter Games and Jio Cricket Play Along. The MyJio app is the most popular self-care app with over 150 million downloads and substantial additional features. Jio has forged partnerships with the likes of Balaji Telefilms, Eros International, and Saavn to bring unique content with an intuitive user interface to every Indian.

The company continues to make progress on delivering enterprise solutions, FTTH and IoT, with beta trials initiated in a few locations. These services are being offered using the existing integrated network and platforms. During the year, Jio was awarded the first rank in India and 17th globally in the Fast Company’s World’s 50 Most Innovative Companies list for 2018. Jio also won the Best Mobile Operator Service for Consumers award at the recent Mobile World Congress 2018. It was awarded The Disruptors title in the CNBC TV18’s India Business Leader Awards 2018. JioTV won the Best Mobile Video Content award at the Global Mobile Awards 2018.

Outlook

Jio will continue to evaluate and deploy various technologies, both wireless and wire line, to offer comprehensive broadband solutions to consumers, small businesses, enterprises, government, and other entities, while building and innovating on a full suite of digital services and applications.

While Jio continues to march on its promise to shape the future of India through transformative, quality, and affordable access of end-to-end digital services for every Indian and making the Digital India vision a reality, Jio reiterates its vision and ultimate goal of a full digital life style solution provider to every Indian and making a meaningful social-economic impact.

1QFY19

This quarter, Reliance Jio announced the launch of the world’s first artificial intelligence (AI) based brand engagement platform – JioInteract. The first of many services to be launched on this platform is the Live Video Call that features India’s favorite celebrities.

Reliance and Radisys Corporation, a global leader of open telecom solutions, have entered into a definitive agreement under which Reliance will acquire Radisys for USD 1.72 per share in cash. This acquisition will accelerate Jio’s global innovation and technology leadership in the areas of 5G, IoT, and open source architecture adoption.

Digital services

Robust EBITDA of Rs 3147 crore; net profit of Rs 612 crore. India’s largest wireless data subscriber base (215.3 million as of 30 June 2018). 642 crore GB data consumption during 1Q FY19. ~10.6 GB per user per month; 76 percent of total industry 4G data traffic. Highest voice consumption per sub at 744 minutes per month.

Segment performance

Strong performance led by growth in subscriber additions as well as higher data usage.  215.3 million subscribers; net adds of 28.7 642 crore GB data consumption; ~10.6 GB/user/month; 76 percent of total industry 4G data traffic. Highest voice consumption per sub at ~744 minutes per month. Robust EBITDA margins; strong operating leverage to play out. JioGigaFiber – largest greenfield fixed line broadband to be launched covering 1100 cities.

Outlook

Jio’s mission is to connect everyone and everything, everywhere – always at the highest quality and the most affordable price.

Reliance Industries Limited is expected to go for an initial public offering (IPO) for its telecom unit Reliance Jio Infocomm Limited in the next 2-3 years. The plan for listing RJio IPO will be formulated after the company’s consumer businesses, which include Reliance Jio, overtake its energy business in terms of revenue.

With the company turning profitable and a recent report by CLSA claiming that Reliance Jio had one of the lowest customer acquisition and network costs, the company appears to be focusing on retaining and adding more customers. RJIo’s aggressive plans to add customers in the recent past have led to the constitution of many research and development centers. The company is also expected to invest hugely in AI.

The petroleum-to-retail-stores conglomerate has invested more than Rs 2.5 lakh crore in the telecom industry in the past few years attempting to capture a major share of the rising digital consumption – from data to multimedia and streaming of movies and entertainment content on various platforms. It is also aggressively expanding its retail venture.

“While India has pole-vaulted into global leadership in the mobile broadband space… we still lag behind significantly in fixed-line broadband. Optical fiber based fixed-line broadband is the future. Jio is determined to move India to among the top 5 in fixed-line broadband, too” said Mukesh Ambani, at the recent shareholders meet.

“Jio, now the world’s largest and fastest growing mobile data network, stunned the world and made us proud by turning profitable in the very first year of operations.

The year saw our consumer businesses attain a threshold, wherefrom they will start contributing meaningfully to consolidated profits. From a mere 2 percent in FY 2016-17, Jio and Retail accounted for 13.1 percent of RIL’s consolidated segment EBITDA in FY 2017-18. This was achieved notwithstanding a sharp 33.6 percent spurt in consolidated EBITDA to `74,184 crore. Our aim is to have the consumer businesses contribute on par with the energy and materials business over the next decade, when we celebrate our Golden Jubilee.”

Mukesh D. Ambani
Chairman and Managing Director,
Reliance Industries Limited

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