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Home / Editorials / Mukesh Ambani’s gamble pays off | HT Editorial

Mukesh Ambani’s gamble pays off | HT Editorial

Recent investments are a win-win for Jio and US tech majors

editorials Updated: Jul 16, 2020 19:16 IST
Hindustan Times
Why is everyone investing in Jio Platforms?
Why is everyone investing in Jio Platforms?(REUTERS)

Google. Facebook. Intel. Qualcomm. A bunch of storied private equity firms and sovereign wealth funds. These are some of the companies that have, in the span of a year, together invested around Rs 150,000 crore in Jio Platforms for a one-third ownership of the company promoted by India’s richest man, Mukesh Ambani. The investments have come in neatly in the period between Reliance’s 2019 and 2020 annual general meetings (AGMs). Why is everyone investing in Jio Platforms?

That’s an easy question. Combining hi-tech with low cost, and aided by a conducive regulatory regime, Mr Ambani has built India’s largest telecom company (it has a one-third share of the market), ahead of Vodafone Idea and Bharti Airtel. It has one of the most modern high speed wireless networks in the country, and while building this, it launched services at a price its competitors called “predatory”. This cost the company a lot of money (and forced it to take on debt), but the investments that have flowed in over the past year show that Mr Ambani’s strategy has paid off. Having built the pipe (as analysts called it), and acquired customers (for long, Reliance was criticised for faltering in consumer businesses), Mr Ambani has embarked on doing what Reliance does best — integrating forwards and backwards. The synergies and linkages between telecom, banking, and retail have been known since the early 2000s, and Jio (or its parent Reliance) have a toehold in all three. On Wednesday, during the Reliance AGM, Mr Ambani also announced that his company is capable of building 5G networks on its own — obviating the need to tap companies such as China’s Huawei (at the receiving end of the global backlash against China and concerns that the company could provide a backdoor into its network, for surveillance, to Chinese authorities). Mr Ambani’s father, Dhirubhai Ambani, followed the same strategy in the petrochemicals business — integrating forward and backward to own the entire supply chain. Mukesh Ambani has sought to do the same thing in petroleum (with limited success), retail (where Reliance Retail’s farm-to-fork strategy is playing out), and telecom.

There is one difference, though. In the 1980s, the company’s efforts at integration were largely driven by a desire to reap cost-efficiencies. Now, its expansive play revolves around data and information — something that American technology majors realise. They were locked out of China, and while they were present in India, none of them were in a position to dominate the emerging digital landscape (which has leapfrogged at least a decade on account of Covid-19). Their investments in Jio gives them all stake in a business that could do just that.

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