Google, Facebook, and Microsoft all want a slice of this tech pie

Sarvesh Mathi

Aug 4, 2020·10 min read

Jio is a household name in India, and it’s finally getting some attention in the rest of the world. The young tech company is not just weathering the Covid-19 storm, but thriving in it. In the last four months, the company has raised over $20 billion from a list of high-profile investors at a time when many companies are struggling to stay afloat.

To put this unparalleled fundraising in context, Jio has raised more money in four months than the entire Indian start-up ecosystem raised in 2019, combined.

The fundraising streak began in April, when Facebook invested $5.7 billion to take an enormous 10% stake in the company. Soon after, a steady stream of private equity firms joined the foray. Abu Dhabi Investment Authority, Mubadala, and Public Investment Fund of Saudi Arabia, all sovereign funds of major Middle Eastern countries, also pitched in. Reliance, Jio’s parent company, became net debt-free nine months before its targeted date, and it appeared as if the investment spree had ended.

The latest name added to this growing list is Google, which invested over $4.5 billion for a 7.7% stake on July 15. That’s nearly half of the total amount that Google pledged to invest in India over the next 5–7 years.

Industry experts speculate that Microsoft will also soon jump on this bandwagon, but the company has yet to officially confirm this. Although, it has already signed partnerships with Jio on other fronts, including the expansion of its Azure cloud business in India.

For a company that’s just over four years old, these investments may seem astounding, but the fact that tech conglomerate Jio is owned by the mighty Reliance puts anything in the realm of possibility.

What is Reliance and how big is it?

Reliance Industries is India’s largest company in terms of revenue, profit, market capitalization, and exports, but all these statistics still do not fully explain the company’s importance. A 2004 New York Times headline is even more apt now than it was then — “A Giant So Big It’s a Proxy for India’s Economy.”

Founded by Dhirubhai Ambani as a small textile manufacturer in 1957, Reliance has grown to become the epitome of the term “conglomerate,” with interests in retail, digital services, media and entertainment, petrochemicals, oil refining, and oil exploration. Each segment further expands into a myriad of businesses that dominate India’s economic landscape. Reliance’s retail segment, for example, encompasses over 11,000 retail stores and multiple brands in consumer electronics (Reliance Digital), fashion and lifestyle (Reliance Trends), and grocery (Reliance Fresh). Amazon is looking to acquire a 10% stake in this last segment. If the deal goes through, each of the Big Five tech companies would have some stake in the young Jio.

Reliance has continued to exceed analysts’ expectations, despite the fact that it was split into two between the feuding sons of Dhirubhai Ambani in 2005. The lesser-known and floundering half, the Reliance Group, is run by Anil Ambani, while Reliance Industries, the company in the spotlight now, is run by the elder brother — and Asia’s richest person — Mukesh Ambani.

Historically, the oil refinery and petrochemical businesses were the most profitable wings of the Reliance conglomerate, but now that “data is the new oil,” Jio is the company’s crown jewel.

What is Jio?

Put simply, Jio Platforms Limited was established in October 2019 to consolidate all the technology businesses operated by Reliance.

In March 2020, Reliance owned 100% of Jio Platforms. Now, after the flurry of investments, Reliance owns 67% while foreign investors own a third.

The biggest subsidiary of Jio Platforms, and the company from which it borrows its name, is Jio Infocomm Limited. Jio Infocomm made a huge splash in the telecom sector in 2016 by offering free unlimited 4G data and calls for its customers for six months. The company was able to lure millions of users this way, but many initially questioned the sustainability of this model and wrote it off as a stunt.

Ultimately, that stunt turned out to be a gamble that paid off. Jio managed to convert these users to paying customers by providing coverage, delivering high data speeds, and setting prices that were unmatched by competitors.

Jio will go down in history as the company that brought tens of millions of Indians online for the first time.

Within a span of four years, Reliance pumped in over $33 billion from its other businesses to expand Jio’s market. It has managed to become the largest telecom operator in the country, with 387.5 million subscribers and 33.4% market share. That’s more users than the entire population of the United States.

Airtel, Jio’s closest rival, has a market share of 28.3%, while Vodafone Idea, the company formed after merging two of India’s largest operators in the pre-Jio days, follows close behind with a market share of 27.5%. The latest data show Jio’s relentless market share grab has no signs of slowing down.

Jio’s impossibly cheap rates have also led to a dramatic decrease in prices among its competitors. Predictably, these companies are financially struggling since Jio launched. In fact, many well-known companies like Aircel and Tata Communications have been forced to exit the market altogether — including the telecom network owned by the younger Ambani brother, Reliance Communications.

Notwithstanding its vast financial impact, Jio will go down in history as the company that brought tens of millions of Indians online for the first time. And it did so with the cheapest data plans in the world, at a cost of merely $0.26 per GB.

Jio was able to achieve these cheap rates by acquiring the only firm that won a pan-India 4G license, leveraging the superiority and cost-efficiency of 4G compared to older cellular standards, and because of the unparalleled size and resources of its parent company.

Jio is more than just a telecom operator

In the last couple of years, Jio has grown to offer products and services in the digital sphere that stretch far beyond what a traditional telecom operator — or any company for that matter — offers.

The company launched basic smartphones under the brand LYF, and later, JioPhone — both which work on its 4G network. The company frequently drops the price of the phones to only a few dollars, making them irresistible entry-level choices.

The JioFiber initiative, which bundles super-fast broadband with television and phone services, is also offered at highly affordable prices. If these weren’t enough, Jio has an ever-growing suite of mobile apps: music streaming platform JioSaavn, Android web browser JioBrowser, messaging app JioChat, payments app JioMoney, media streaming app JioTV, video-conferencing app JioMeet, news app JioNews, cloud storage service JioCloud, movie streaming app JioCinema, and health services app JioHealthHub. And there are dozens of others.

These apps come installed by default on Jio’s phones and on smartphones made by its partners. Although most of them are offered for free, or as a part of a cheap JioPrime subscription, they are valuable data collection and advertisement revenue sources, and have the potential to generate massive income in the future through subscriptions.

What’s in store for Jio?

Nearly half of India’s population — over 600 million people — still does not own a smartphone or have access to the internet. Jio’s goal is to reach these millions, and to create a company with hundreds of millions of customers using a Jio phone to connect to the Jio network — and for those customers to conduct every aspect of their digital lives on an app or service provided by Jio.

Jio hopes to leverage its partnership with Google to make Android-based 4G and 5G smartphones at irresistible prices that would make them perfect entry-level phones for those 600 million customers without a phone. This would put it in competition with Chinese companies like Xiaomi, Vivo, Oppo, OnePlus, and Realme, at a time when anti-China sentiments are running high in the country. As Vedica Kant writes in Marker, “given recent geopolitical tensions between India and China, Reliance is clearly positioning itself to make the most of a nationalist zeitgeist.”

Jio has also partnered with another tech giant, Microsoft, to bring its Office 365 products and Azure cloud platform among other services to millions of merchants and businesses in India.

Meanwhile, Jio recently announced JioGlass, a product similar to Microsoft’s Hololens, in an effort to be an early mover in India’s nascent AR/VR/MR space. JioGlass lets users do immersive video calls, share interactive presentations, and conduct holographic classes. Jio also hopes to transform virtual classrooms into an enriching and personalized experience through its Embibe platform. Both the JioGlass and Embibe platform arrive at a time when work and school are moving completely online and there’s an unmet demand for products and tools to make this process simpler and easier.

Jio is also releasing a new JioTV+ offering, which will aggregate all the top streaming platforms like Netflix, Hotstar, and Amazon Prime on a single device with a single login. It would be a bit likeApple TV, at a fraction of the cost.

In addition to forward-integration with apps and phones, Jio announced that it is building its own backbone for the next-generation cellular standard, 5G, and hopes to begin field deployment in India as early as next year. Currently, Huawei is the leading manufacturer of 5G equipment. But after the ban imposed on Huawei by the United States and the U.K., 5G deployment progress is stalling, as competitors are unable to match Huawei’s advanced technology or its affordable prices. If Jio’s 5G infrastructure stack lives up to its promise, it will not only help Jio become the first 5G network in India, but could conceivably position itself as a leading choice for mobile network operators around the world. Jio’s partnership with Intel and Qualcomm is likely to provide valuable technical expertise on this front. Jio’s role as a manufacturer as well as a telecom operator puts it in a unique position to prove its 5G technology — something that other 5G equipment manufacturers like Nokia and Ericsson lack.

Jio’s next big venture

Perhaps Jio’s greatest prospects lie in its newly established e-commerce and e-grocery venture, JioMart.

Analysts estimate that 90% of Indian retail activity currently takes place offline. JioMart hopes to tap into the exponentially growing Indian e-commerce market, taking on long-established rivals like Amazon, Walmart-backed Flipkart, and Alibaba-backed Big Basket with a strategy to connect existing brick and mortar stores with online customers.

To execute this strategy, Jio is banking on its partnership with Facebook-owned WhatsApp. It hopes to integrate a shopping feature that lets the messaging app’s 400-million Indian users place orders through JioMart and pay with WhatsApp. This combination of reach and convenience is something other e-commerce retailers lack. Jio claims that the initial pilot run of this feature has exceeded expectations. If successful, this will make WhatsApp rival Tencent’s super-app, WeChat.

The future that lies ahead for Jio is well reflected in its $65 billion valuation, which is double that of many more familiar companies. After the recent investments, the company is valued only a little less than the rest of Reliance’s businesses put together. Reliance is expected to debut Jio in domestic and international stock exchanges within the next five years at an estimated valuation of $100 billion.

While Western markets are saturating, the next billion internet users are right there in India. The investors clearly see this opportunity, but the reason why they are entering India through Jio rather than venturing out on their own is not just because of Jio’s market share or potential, but also because Reliance and the Ambani family have close ties to the ruling government, sparing them from the bureaucratic red tape that plagues India.

A sizable portion of the investments will go toward paying off the existing debts accumulated by Reliance to fund this extravagant project and its other businesses, but a significant portion will go toward helping Jio bankroll the products and services outlined above. Jio is not necessarily hoping to build them all in-house — it is open to making acquisitions and funding startups as well. Some of its notable acquisitions include music platform Saavn, ed-tech platform Embibe, AI platform Haptik, communication equipment firm Radisys, drone company Asteria, and AR/VR firm Tesseract.

Jio’s ultimate goal, simply stated, is to deliver every kind of digital product and service imaginable to every nook and corner of India. With the help of the world’s deepest pockets and most powerful players, it may well succeed.