Abu Dhabi investment fund buys 1.85% Jio Platforms stake

Reliance Industries have found a fifth investor to purchase a handsome stake in Jio Platforms, its digital business unit, with Mubadala signing a $1.2 billion cheque for 1.85%.

Confirmed via Twitter, Khaled Abdulla Al Qubaisi, CEO of the Aerospace, Renewables and ICT portfolios for Mubadala, revealed the $1.2 billion investment will make the firm a stake holder in Jio Platforms, the holding company of disruptive telco Reliance Jio and numerous other digital ventures. “This investment is in line with our current ICT strategy and complements our portfolio of investments in telecoms, satellite operations, data centres and other ICT infrastructure,” Al Qubaisi said.

For Reliance Industries, it certainly caps off a successful seven weeks, though who knows whether there are other irons in the fire.

Jio Platform investments since April 22, 2020
Partner Stake Investment Date
Mubadala 1.85% $1.2 billion 4 June
General Atlantic 1.34% $860 million 18 May
Vista Equity Partner 2.32% $1.5 billion 11 May
Silver Lake 1.15% $750 million 4 May
Facebook 9.9% $5.7 billion 22 April
Total 16.56% $10.01 billion

As you can see from the table above, it certainly has been a profitable couple of weeks for the Reliance Industries MD Mukesh Ambani. Aside from the additional cash which is being invested into the business to continue network deployment and upgrades, there are some interesting synergies.

Facebook, for example, offers interesting opportunities to work with SMEs in the emerging cashless economy. General Atlantic already invests in Doctolib, digital healthcare platform in Europe to connect health professionals and patients. Mubadala is the same.

One of the Mubadala investments happens to be Yahsat, a satellite company which offers voice and data coverage across 161 countries. Not only could this company assist Jio by improving the connectivity patchwork in India, it is also an interesting partner to have in the mix for international roaming.

Each of these investors have expertise and investments which would be of interest to the Jio connectivity mission, or the second wave of monetization which follows the democratisation of the mobile internet.

4G subscriptions in India (2015-21), thousands
Year Bharti Airtel Vodafone Idea Reliance Jio Other Total
2015 1,459 21* 77 1,557
2016 10,800 9,541* 72,000 3,700 95,150
2017 30,000 36,998* 160,091 22,466 242,130
2018 77,067 75,300 280,100 22 433,061
2019 127,345 104,200 370,000 604,745
2020 180,491 105,062 406,978 702,686
2021 219,718 110,344 403,310 754,803

*For simplicity, Vodafone India and Idea Cellular subscriptions have been bundled together

Source: Omdia World Information Series

The table above offers a lot of information, but there are a few very important points which we would like to draw attention to.

Firstly, the total number of 4G subscriptions in India. At 754 million, there is still plenty of headroom for growth in a country where the population exceeds 1.3 billion. Secondly, the Reliance Jio disruption dragged the India market through a digital revolution from 2016 onwards. And third, Reliance Jio has a much greater opportunity to diversify revenues through digital services as it has more 4G subscriptions than its rivals.

When you look at the subscriptions data for all mobile technologies, adding everything from 1G through to 5G, the market share battle looks a lot more flattering for Bharti Airtel and Vodafone Idea, but it is a misleading picture. We are focusing on the 4G subscriptions as there is much more potential for additional revenues from this generation of mobile connectivity.

The blunt force object approach to telecoms is selling more subscriptions at an attractive price. Reliance Jio is clearly better at this than rivals, and there is more opportunity to sell 4G contracts in India. This will make Reliance an interesting investment, but the more savvy investors will look at everything this connectivity enables.

Through Jio Platforms, Reliance Industries has launched ventures into digital entertainment, AI, enterprise connectivity, IOT and many others. Democratising connectivity is an entry point to build a second wave of businesses as more of India is brought into the digital economy. These additional investments could be healthcare orientated, offering an alternative to traditional banking infrastructure or digitising government services. As the growth of Silicon Valley has shown, there is potential to make fortunes by leveraging connectivity.

This is why Jio Platforms is getting foreign investors excited. There is so much more to India’s digital economy than selling 4G subscriptions.

Making Sense of the Telco Cloud

In recent years the cloudification of communication networks, or “telco cloud” has become a byword for telecom modernisation. This Telecoms.com Intelligence Monthly Briefing aims to analyse what telcos’ transition to cloud means to the stakeholders in the telecom and cloud ecosystems. Before exploring the nooks and crannies of telco cloud, however, it is worthwhile first taking an elevated view of cloud native in general. On one hand, telco cloud is a subset of the overall cloud native landscape, on the other, telco cloud almost sounds an oxymoron. Telecom operator’s monolithic networks and cloud architecture are often seen as two different species, but such impressions are wrong.

(Here we are sharing the opening section of this Telecoms.com Intelligence special briefing to look into how telco cloud has changing both the industry landscape and operator strategies.

The full version of the report is available for free to download here.)

What cloud native is, and why we need it

“Cloud native” have been buzz words for a couple of years though often, like with many other buzz words, different people mean many different things when they use the same term. As the authors of a recently published Microsoft ebook quipped, ask ten colleagues to define cloud native, and there’s good chance you’ll get eight different answers. (Rob Vettor, Steve “ardalis” Smith: Architecting Cloud Native .NET Applications for Azure, preview edition, April 2020)

Here are a couple of “cloud native” definitions that more or less agree with each other, though with different stresses.

The Cloud Native Computing Foundation (CNCF), an industry organisation with over 500 member organisations from different sectors of the industry, defines cloud native as “computing (that) uses an open source software stack to deploy applications as microservices, packaging each part into its own container, and dynamically orchestrating those containers to optimize resource utilization.”

Gabriel Brown, an analyst from Heavy Reading, has a largely similar definition for cloud native, though he puts it more succinctly. For him, cloud native means “containerized micro-services deployed on bare metal and managed by Kubernetes”, the de facto standard of container management.

Although cloud native has a strong inclination towards containers, or containerised services, it is not just about containers. An important element of cloud native computing is in its deployment mode using DevOps. This is duly stressed by Omdia, a research firm, which prescribes cloud native as “the first foundation is to use agile methodologies in development, building on this with DevOps adoption across IT and, ideally, in the organization as well, and using microservices software architecture, with deployment on the cloud (wherever it is, on-premises or public).”

Some would argue the continuous nature of DevOps is as important to cloud native as the infrastructure and containerised services. Red Hat, an IBM subsidiary and one of the leading cloud native vendors and champions for DevOps practices, sees cloud native in a number of common themes including “heavily virtualized, software-defined, highly resilient infrastructure, allowing telcos to add services more quickly and centrally manage their resources.”

These themes are aligned with the understanding of cloud native by Telecoms.com Intelligence, and this report will discuss cloud native and telco cloud along this line. (A full Q&A with Azhar Sayeed, Chief Architect, Service Provider at Red Hat can be found at the end of this report).

The main benefits of cloud native computing are speed, agility, and scalability. As CNCF spells it out, “cloud native technologies empower organizations to build and run scalable applications in modern, dynamic environments such as public, private, and hybrid clouds. Containers, service meshes, microservices, immutable infrastructure, and declarative APIs exemplify this approach. These techniques enable loosely coupled systems that are resilient, manageable, and observable. Combined with robust automation, they allow engineers to make high-impact changes frequently and predictably with minimal toil.”

To adapt such thinking to the telecom industry, the gains from migrating to cloud native are primarily a reflection of, and driven by, the increasing convergence between network and IT domains. The first candidate domain that cloud technology can vastly improve on, and to a certain degree replace the heavy infrastructure, is the support for the telcos’ own IT systems, including the network facing Operational Support Systems and customer facing Business Support System (OSS and BSS).

But IT cloud alone is far from what telcos can benefit from the migration to cloud native. The rest of this report will discuss how telcos can and do embark on the journey to cloud native, as a means to deliver true business benefits through improved speed, agility, and scalability to their own networks and their customers.

The rest of the report include these sections:

  • The many stratifications of telco cloud
  • Clouds gathering on telcos
  • What we can expect to see on the telco cloud skyline
  • Telco cloud openness leads to agility and savings — Q&A with Azhar Sayeed, Chief Architect, Service Provider, Red Hat
  • Additional Resources

The full version of the report is available for free to download here.

Indian telco association pushes for ‘floor tariffs’ on data pricing

In an open letter to India’s telecoms regulator, the Cellular Operators Association of India (COAI) has pressed for quicker decision making on pricing restriction rules.

The COAI is in a very interesting position currently. As an association representing the telecoms industry, it is tasked with responsibilities to lobby government authorities for favourable rules. But the question is what are favourable rules?

The association has three core members; Bharti Airtel, Vodafone Idea and Reliance Jio. Two of these members would like more stringent rules on pricing to protect their interests from the disruptive pricing strategies of the third, Reliance Jio.

Jio entered the market at the end of 2015 with data plans to undermine the traditional telcos and free phone calls for new customers. Bharti Airtel and Vodafone Idea suffered because of it and have been calling for more stringent rules to prevent the disruptive Jio from causing even more chaos and continuing to erode profits.

This is a painful position for a telco-neutral association to be in, though it is in favour of floor pricing.

“We expected an early decision by the Authority, on having the Floor Tariffs for the Data services,” Rajan Mathews, Director General of the COAI said in the letter to the Telecom Regulatory Authority of India (TRAI).

“While, we acknowledge that the recent situation on account of COVID-19 might have caused some constraints, however the Authority has started conducting the OHD through online process on various other topics. Accordingly, we request the Authority to kindly hold an OHD on this issue at the earliest.

“The industry is looking forward to an early conclusion on this important matter with great interest and we therefore request the Authority for an early decision on the same.”

The longer this consultation from the TRAI continues, uncertainty prevails. Uncertainty is the enemy of progress and investment in the telecoms industry. A speedy decision would be the biggest net gain for the industry, though it is questionable whether anything can be done quickly in the telecoms industry.


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A look back at the biggest stories this week

Whether it’s important, depressing or just entertaining, the telecoms industry is always one which attracts attention.

Here are the stories we think are worth a second look at this week:


Facebook reignites the fires of its Workplace unit

Facebook has announced its challenge to the video-conferencing segment and a reignition of its venture into the world of collaboration and productivity.

Full story here


Trump needs fodder for the campaign trail, maybe Huawei fits the bill

A thriving economy and low levels of unemployment might have been the focal point of President Donald Trump’s re-election campaign, pre-pandemic, but fighting the ‘red under the bed’ might have to do now.

Full story here


Will remote working trends endure beyond lockdown?

It is most likely anyone reading this article is doing so from the comfort of their own home, but the question is whether this has become the new norm is a digitally defined economy?

Full story here


ZTE and China Unicom get started on 6G

Chinese kit vendor ZTE has decided now is a good time to announce it has signed a strategic cooperation agreement on 6G with operator China Unicom.

Full story here


ITU says lower prices don’t lead to higher internet penetration

The UN telecoms agency observes that, while global connectivity prices are going down, the relationship with penetration is not as inversely proportion as you might think.

Full story here


Jio carves out space for yet another US investor

It seems the US moneymen have a taste for Indian connectivity as General Atlantic becomes the fourth third-party firm to invest in the money-making machine which is Jio Platforms.

Full story here


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Can the sharing economy (ride-sharing, short-stay accommodation etc.) survive COVID-19?

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Jio carves out space for yet another US investor

It seems the US moneymen have a taste for Indian connectivity as General Atlantic becomes the fourth third-party firm to invest in the money-making machine which is Jio Platforms.

New York-based private equity firm General Atlantic has become the latest company to write a handsome $860 million cheque as table stakes for a 1.34% stake in Reliance Industries’ digital venture. Reliance Jio Platforms is looking like a very popular focal point for US investors attempting to tap into the rapidly developing Indian digital ecosystem.

In a matter of four weeks, Reliance Industries has managed to convince Facebook, Silver Lake, Vista Equity Partners and General Atlantic to part with almost $9 billion.

“I am thrilled to welcome General Atlantic, a marquee global investor, as a valued partner,” said Mukesh Ambani, Chairman of Reliance Industries. “I have known General Atlantic for several decades and greatly admired it for its belief in India’s growth potential.

“General Atlantic shares our vision of a Digital Society for India and strongly believes in the transformative power of digitization in enriching the lives of 1.3 billion Indians. We are excited to leverage General Atlantic’s proven global expertise and strategic insights across 40 years of technology investing for the benefit of Jio.”

While such warm words are usually offered irrelevant as to who the new investor is, General Atlantic is a useful company to have looped into the equation.

In the existing investment portfolio is NoBroker.com, an Indian consumer-to-consumer real estate transaction platform, Doctolib, digital healthcare platform in Europe to connect health professionals and patients, and Quizlet, an online learning platform. This is a company which has experience in the technology world, but also a number of bets which would be very complementary for the existing ventures in Reliance Jio Platforms.

“As long-term backers of global technology leaders and visionary entrepreneurs, we could not be more excited about investing in Jio,” said Bill Ford, CEO of General Atlantic.

“We share Mukesh’s conviction that digital connectivity has the potential to significantly accelerate the Indian economy and drive growth across the country. General Atlantic has a long track record working alongside founders to scale disruptive businesses, as Jio is doing at the forefront of the digital revolution in India.”

To call Jio disruptive is somewhat of an understatement, and the business model does seem to be drawing more attention from some very interesting organisations around the world. With the telco business unit as the tip of the spear, there is a clear opportunity to drive forward a secondary wave of digital businesses as connectivity get democratised through the country.

Doctolib, one of General Atlantic’s investments, is a very interesting platform for a country where traditional healthcare infrastructure is sporadic. The Jio digital ecosystem could act as a springboard for the app in the market, while Jio is then invested in another venture. Its collaboration and differentiation.

Reliance Jio, the telecoms business, is a powerful force, but the most interesting ideas are the ventures emerging today. The businesses which are enabled by the connectivity revolution which is sweeping the country. This is why the likes of General Atlantic are interested in invested in Reliance Jio Platforms now, not two years ago; the vision is much bigger than phone calls and streaming cat videos.


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Reliance Jio signs a third deal to add another $1.5bn to its bank account

Vista Equity Partners has become the third-largest investor in Reliance Platforms, purchasing a 2.32% equity stake in the disruptive business for $1.5 billion.

Following similar transactions with Facebook and Silver Lake, Vista will be become the third-largest investor in a business which is driving digital transformation and evolution in one of the worlds’ most attractive economies. Reliance Platforms, the business unit of Reliance Industries which incorporates all telecoms and digital ventures, is quickly becoming one of the worlds’ most interesting digital investments.

“We believe in the potential of the Digital Society that Jio is building for India,” said Robert Smith, CEO of Vista. “Mukesh’s vision as a global pioneer, alongside Jio’s world-class leadership team, have built a platform to scale and advance the data revolution it started.

“We are thrilled to join Jio Platforms to deliver exponential growth in connectivity across India, providing modern consumer, small business and enterprise software to fuel the future of one of the world’s fastest growing digital economies.”

As Smith highlights, Reliance Platforms is more than a telco. Jio, the telecoms business unit, might be the disruptive force in India being used to democratise connectivity, but this is only one branch of the business. Following behind the telecom revolution, Reliance Platforms is attempting to encourage digital transformation programmes in SMEs, healthcare and entertainment, through digital currencies, streaming platforms and big data.

This is perhaps what is exciting international investors; Jio is so much more than a telecoms giant. The team has the vision to appreciate that telecoms is simply the foundation on which to build bigger things atop. This is the difference between a telco which will be relevant into the future, and one which is at risk of falling into the commoditised connectivity business model.

For example, with low-cost connectivity tariffs, more Indian consumers and SMEs are encouraged into the digital economy. A telco will make money by enabling this, but it is a utility with limited potential. Reliance Platforms is using this as a vehicle to enable alternative digital payment platforms in a joint venture with Facebook, to create growth revenue streams not just sustainable ones. The profits will be realised through the second wave of disruption.

It is realising connectivity is only the first step, a nuance which is not evident through the communications of other telcos. This vision is perhaps what is most interesting to investors.

“Like our other partners, Vista also shares with us the same vision of continuing to grow and transform the Indian digital ecosystem for the benefit of all Indians,” said Mukesh Ambani, MD of Reliance Industries. “They believe in the transformative power of technology to be the key to an even better future for everyone.”

The business model which is slowly emerging out of Reliance Platforms is starting to look very exciting. Cut price and free voice tariffs might not make that much money, but they don’t have to if there is success in the secondary business models which are being enabled through the democratisation of connectivity.

This is the sort of business evolution which should be evident throughout the telecommunications industry but isn’t.

Jio is running riot again, but more synergies (sigh) are on the horizon

The Indian telecommunications industry might be crumbling around it, but Reliance Jio is still reaping the rewards of disruption and chaos, and there is much more to come.

Although the telco is now considered a staple of the Indian connectivity diet, it is easy to forget this is a company which is only five years old. This was not the first firm to emerge as a disruptive influence on the telco industry, but few could say they have enjoyed the rip-roaring success of Reliance Jio.

But most importantly, this might only be the tip of the iceberg, after all, this is only one business unit of a wider corporation.

“Our consumer businesses further strengthened their leadership positions and recorded robust growth on all operating and financial parameters during the year,” said Mukesh Ambani, Chairman and Managing Director of Reliance Industries.

“Both Retail and Jio, continue to work towards providing superior products and services to Indian consumers. We are fully committed on our investment plans in our consumer businesses and new initiatives.

“We are at the doorsteps of a huge opportunity and our rights issue and all other equity transactions will strengthen Reliance and position us to create substantial value for all our stakeholders.”

Reliance Jio results for financial year ending March 31 (USD ($), millions)
  Total Year-on-year
Total revenue 9,038 +40.7%
Profit 1,896 +63.5%
Subscribers 387.5 +26.3%

Source: Reliance Industries Investor Relations

With all the numbers heading in the right direction, you can see why Reliance Jio is an exciting business. Interestingly enough, not only are the total subscriber numbers shooting north, the team is also maintaining ARPU at roughly $1.73, while data usage is also increasing. There has been a surge of traffic on the network during the COVID-19 crisis as Indians are placed under lockdown orders, as much as a 50% increase on normality, but the network is holding steady.

These numbers are impressive, especially compared to the woes of competitors during this period, but Reliance Jio is still primarily a wireless business. Now it has established dominance in the mobile arena, the potential to lean into other areas is exciting. This means broadband and content, but also ventures into parallel industries.

It is a dreaded word, but there are synergies throughout the Reliance Industries portfolio.

The Reliance Industries business brought in revenues of roughly $87 billion through the last 12 months, with the business growing 5% year-on-year. The group has access to markets in 108 countries with operations in energy, petrochemicals, textiles, natural resources and retail, as well as telecoms.

Split of revenues by business unit for Reliance Industries (USD ($), millions)
Business unit Total revenue Year-on-year
Telecoms 9,038 +40.7%
Retail 21,510 +24.8%
Refining 51,159 -1.6%
Petrochemicals 19,177 -15.6%
Oil and Gas 423 -35.8%
Media 707 +4.7%

Every telco in the world wants to develop new products and services for enterprise customers and co-create new business ventures to marry connectivity and traditional business, while forward-looking enterprise organisations want to embrace connectivity. Cross-pollination within an existing corporation to meet these objectives creates a very exciting opportunity to Reliance Industries to become an industrial giant with connectivity at the core.

Part of this expansion into the novel and unknown is already being demonstrated with Reliance Jio’s partnership with Facebook.

In recent weeks, Facebook was announced a new investor in the digital business unit, taking a 9.9% stake for $5.7 billion. As part of this transaction, Facebook entered into a partnership with the digital and retail business units to create a digital payments platform, with WhatsApp playing a significant role, for a society which largely lacks traditional banking infrastructure.

This is a new venture for Reliance Industries, bringing in a third-party to help bridge the gap between two already successful business units. Many people talk about innovation, but this is a genuine example, creating new revenues without cannibalising existing units with the help of an industry partner. It is a case of 1+1+1=4.

As you can see from the image above, Reliance Jio is much more than a telecoms company nowadays. It is spreading its wings to various different technologies, segments and concepts, all of which can be developed into different revenue streams. This creates a significant amount of diversification in the TMT segments, but when combined with the different units of the Reliance Industries parent company it creates almost countless new opportunities.

Reliance Jio has been a very interesting company to keep an eye on over the last few years, but with the gaps between business units being bridged, and the eclectic mix of existing ventures, the opportunities for the wider Reliance Industries are very exciting.

Facebook buys into Jio’s disruptive mission

Reliance Industries has announced Facebook will invest roughly $5.7 billion for a 9.9% stake in its telecoms and tech business unit.

Facebook is an internet company which is still overly reliant on a direct correlation between userbase and revenue growth, and India is a market with a substantial number of unconnected individuals. As one of the fastest growing telecoms and technology businesses in the second most populous country in the world, this is a smart bet.

If $5.7 billion is table stakes to get involved in the Indian market, it could be viewed as a fair price for Facebook to grow its userbase from roughly 300,000. With an estimated population of 819 million aged between 15-64, there is massive potential for growth for the social media giant.

And as a disruptive, fast-growing telco, with side-bets in smartphones, IOT devices, cloud, edge computing, AI, big data and healthcare, Reliance Jio certainly has the ambition which could match Facebook.

Changing fortunes in Indian telecoms market (2018-2019)
Telco Market share** Subscriptions* Year-on-year
Reliance Jio 32.14% 370,000,000 24.3%
Bharti Airtel 28.43% 287,591,000 (1.2%)
Vodafone Idea 28.89% 304,000,000 (27.3%)
BSNL 10.26% 118,025,372 3.2%

* Omdia World Information Series

** Telecom Regulatory Authority of India data

In the press materials, Reliance Jio has stated the focus will be India’s 60 million micro, small and medium businesses, 120 million farmers and 30 million small merchants, suggesting WhatsApp could play a significant role. As a country which lacks wide-spread traditional banking facilities, alternative digital payment platforms are a hotbed of potential.

While Google, Apple, Tencent and numerous others are already eyeing this opportunity, this tie-up with Reliance Jio could provide a material advantage. For example, as part of the partnership Jio Platforms, Reliance Retail and WhatsApp will enter into a commercial partnership agreement to further accelerate the JioMart platform. This direct link to existing Jio customers is a very attractive proposition for the WhatsApp enterprise team.

“When Reliance launched Jio in 2016, we were driven by the dream of India’s Digital Sarvodaya – India’s Inclusive Digital Rise to improve the quality of life of every single Indian and to propel India as the world’s leading Digital Society,” said Mukesh Ambani, Chairman and MD of Reliance Industries.

“All of us at Reliance are therefore humbled by the opportunity to welcome Facebook as our long-term partner in continuing to grow and transform the digital ecosystem of India for the benefit of all Indians.”

As an investment, this transaction fits in perfectly with the overarching Facebook mission to ensure more individuals are brought into the digital society.

While Reliance Jio is a mainstay of the telecoms fraternity nowadays, it wasn’t long ago it was a major disruption to the Indian telco industry, offering radically reduced data tariffs to the masses. It democratised connectivity for Indian consumers, set against a backdrop which had become a very stagnant industry. Like investments in the Telecom Infra Project (TIP), the Libra digital currency and Peruvian telco Internet para Todos Perú (IpT Peru), the objective for Facebook is to bring connectivity to more people.

The TIP mission is to commoditise network infrastructure to bring down the price of deploying equipment in developing markets and rural environments, while the Libra stablecoin creates an entry point to the digital economy for those who lack traditional banking facilities, and IpT Peru is bringing the internet to unconnected communities with OpenRAN infrastructure. Reliance Jio is another company which is helping to connect the unconnected, but why should Facebook care so much?

Facebook revenue streams (2016-2019, year-end)
Year Advertising Other Split (%)
2019 69,655 1,042 98.5/1.5
2018 55,013 825 98.5/1.5
2017 39,942 711 98.2/1.8
2016 26,885 753 97.2/2.8

Facebook investor relations (revenues in millions USD – $)

Although Facebook has been attempting to diversify its revenue streams, the majority is still attributable to the core advertising business. This is a unit which relies on the userbase; there are only so many ads which can be served to an individual before the experience is impacted. To ensure revenues grow but users are not irritated by an overly commercialised platforms, new users need to be attracted to the platform.

In the developed markets, Facebook is reaching saturation point. It will have to add additional services in these markets to continue growing revenues, as well as attract users to the platform in the developing markets.

The financial growth which Facebook has demonstrated year-on-year is quite remarkable, though this is largely due to the core advertising business. The social media giant has largely failed to drive into new markets, with many acquisitions still waiting to pay dividends. The $16 billion WhatsApp acquisition is certainly one, but with the Reliance Jio partnership there is an opportunity to add a greater enterprise and payments venture into the mix.

Although the primary mission is most likely to expand the userbase for the core social media platform, the ambitious nature of Reliance Jio and embryonic stage of the Indian digital economy offers Facebook a significant opportunity to develop new ventures. This is a market which could act as an incubator for the diversification Facebook has been attempting for years.

Facebook reportedly close to buying 10% of Reliance Jio

Social media giant Facebook seems set to continue its push into telecoms with a major stake in India’s dominant operator group.

The rumour comes courtesy of the FT, which knows some people who know some people. According to only one of them Facebook was about to close a deal in which it would buy 10% of Reliance Jio when the coronavirus pandemic caused the world to grind to a halt. Presumably Zuck doesn’t fancy sealing such a big deal over Facebook Messenger video chat.

While Jio is owned by the richest man in India, it has had to borrow heavily to fund its nationwide rollout and give connectivity away for free to millions of Indians. At current estimated valuations 10% of the company is worth around $6 billion, which would pay off a few bills.

Facebook’s sudden interest in buying chunks of operators on the other side of the world is less obvious. The most likely reason would be to get its services – Facebook, WhatsApp, Instagram, etc – to the front of the queue when it comes to preinstallation on Jio phones.

$6 billion is a lot of cash to blow on a bit of queue-jumping, however, so Facebook must be pretty confident of a healthy return in the form of advertising to what will soon be the world’s most populous country. As Vodafone is discovering, the Indian telecom market is a minefield, but having said that, if you were going to invest in anyone there, it would have to be Jio.

Reliance Jio reckons it can do 5G without vendor help

Reliance Jio has thrown somewhat of a spanner in the 5G ecosystem, reportedly claiming it has developed its own ‘end-to-end’ 5G technologies.

According to The Economic Times, the disruptive telco is set to take its chaos to another segment of the industry; network infrastructure. Although trials are still taking place, the confident claims suggest the telco could become less reliant on the traditional ecosystem and could create more of a commodity-based supply chain.

“We are more scalable than these vendors and are fully automated since we have our own cloud-native platform,” one insider said. “In 5G, we will totally be self-sufficient. We can give the design, layouts and board support packages to third-party manufacturers to have our gear made.”

Such news will come as somewhat of a headache for some suppliers, most notably because of the potential profits Jio would have offered. India is of course a massive country which is aggressively driving towards digital after all. Jio has been trialling 5G technologies with most of the main players, while Samsung is currently the sole supplier of RAN equipment.

Speaking to Gabriel Brown of Heavy Reading, Jio is a telco which is very capable of making such an idea work, while there are numerous benefits from a commercial and operational perspective as it gains much greater control over its technology roadmap. The in-house designs would be built for the nuances of the Jio network and no-one else after all.

However, there are always risks.

“It remains to be seen what the right mix is,” said Brown. “Just because you can, doesn’t mean it’s the right thing to do.”

Bringing elements of the telco business in-house could be considered a positive move, but sometimes you have to have some humility. As Brown points out, the major vendors have close to ten years of 5G R&D under their belts and at least 5 years of actual technology and product development. Replicated this is such a short period of time, is not going to be a simple task.

James Crawshaw, another Heavy Reading analyst, was also slightly sceptical of the initiative.

“It is usually more efficient to buy than build,” said Crawshaw. “They are one operator, while vendors can spread R&D costs over many customers.”

Crawshaw suggests this could be somewhat of a difficult equation to balance. Some companies have a powerful engineering culture, encouraging employees to build rather than buy. This might be more cost effective (assuming the project works out) but detracts from focusing on what really will differentiate them, software and applications for example.

What this is demonstrative of is the evolving telco space.

“As networks become pieces of software, the market will be more open to challengers, including network operators themselves,” said Dario Talmesio of analyst firm Omdia.

With initiatives such as Facebook’s Telecom Infra Project (TIP) and technologies such as OpenRAN gaining more momentum, the telco industry is evolving very quickly. Hardware companies used to be the heavyweights, though this influence is becoming increasingly weakened as software specialists become more important.

Although the success of this project is still unknown, it does raise some very interesting questions. Could this further dilute the influence of industry heavyweights such as Ericsson, Nokia and Huawei? Might this accelerate the movement towards commodity-based hardware in the networks? Will Jio be able to source new revenues through a licensing unit? Might other telcos be encouraged to head down this route also?