Reliance to invest Rs 600 bn in Jio this year, may borrow Rs 1 trn more

Subscriber additions, while suppressing incumbent telecom operators, will continue to remain top priority, say analysts

Mukesh Ambani-led Reliance Industries Ltd (RIL) is likely to invest another Rs 600 billion this year in its telecom business Reliance Jio Infocomm with an emphasis on faster rollout of broadband services and wireless expansion, Livemint reported, quoting anonymous company sources.

The sources have also been quoted as saying that Reliance Jio might borrow up to Rs 1 trillion in addition to the above-mentioned investment. Jio and RIL spokespersons did not comment on queries about the investment.

“Management made it very clear that their focus in the near term is to retain and grow their subscriber base and they would respond to market pricing. Essentially the implication was that incumbents would need to raise tariffs, but this would effectively lead to loss of market share for incumbents as JIO would offer the best 'value' to subscribers and hence continue to see large subscriber additions,” noted JP Morgan in their recent report on RIL.

The report further stated that JIO is expected to launch its broadband business with a pricing strategy similar to that of its telecom arm, given its focus is on creating a new market.

While JIO’s average revenue per user (ARPU) fell to Rs 137 from Rs 154 in the last quarter of 2017-18, it still remains better than that of Airtel and Idea cellular. JIO also managed to add almost 9 million subscribers during the quarter.

“Jio is expected to remain aggressive to gain market share, which could keep industry revenue under pressure and return ratios of incumbents suppressed,” noted an India Equity Research in a report on Monday.

JioFiber, the wired broadband arm, has started offering what they claim to be 'ultra-high-speed' fibre to home (FTTH) broadband connections with 1.1 terabytes (TB) of free data at speeds of 100 megabits per second (mbps) in select markets in the country already. However, commercial services are likely to be rolled out in the second-half of the year.

The company currently claims more than 300,000 km of optical fibre network in the country and the company is expected to target over 100 million households across the country with the service.

BCCI media rights: STAR India wins the toss in cricket sweepstakes

Winning the rights would have given the Ambanis a big boost, say analysts, in increasing data usage for the 160 million Jio customers

Will acquiring the Board of Control for Cricket in India’s (BCCI’s) rights for bilateral international cricket matches in India be the winner’s curse for STAR India?

Or will the acquisition reinforce STAR India’s top position in cricket telecasting by increasing the gap with its traditional rival Sony and keeping Mukesh Ambani’s Reliance Jio away for a second time from winning coveted cricket rights (the first time was the Indian Premier League, or IPL), which not only drive customers but also bring in huge advertising revenue as well as subscriptions.

The Ambanis, who have built a media empire, recently took a majority stake in Viacom 18, the company that runs a bouquet of channels led by Colors, and is fighting a headlong battle for viewership in the general entertainment space with STAR India.

What Viacom does not have is a sport channel, which it has avoided because of the high cost of acquiring sport properties.

Winning the rights would have given the Ambanis a big boost, say analysts, in increasing data usage for the 160 million Jio customers, who are looking for compelling content, and cricket is a no brainer. It could have also given Viacom 18 an opportunity to fill a gap for a cricket property. Jio is launching fibre-to-home service, which will be driven by content and TV services, taking on Rupert Murdoch’s DTH business in Tata-Sky.

But STAR India has to pay a stiff bill not only for the BCCI rights but also grabbing the rights of the IPL, also for five years, and that is Rs 44.956 billion (BCCI and IPL) every year, more than double the advertising revenue that flows to cricket currently.

And while it has bid very high to win against all odds, its challenge now is to make money. The enormity of the task can be seen in the fact that currently advertising revenue for cricket on TV is around Rs 20 billion, of which the IPL generates more than Rs 13 billion. Digital advertising last year generated only Rs 2 billion, primarily from the IPL to STAR’s Hotstar, and, despite all the promise, has a long way to go.

So the money-making equation has to change dramatically. STAR sources say they will not be able to break even on day one, but the properties are attractive. Some say it has overbid for both the properties and it might not be able to break even at all and has overestimated the revenue-generating potential for digital. They say that unlike in other countries where sport properties are sold high, India does not have the potential for subscription revenue to go up for a long time, so that one can reduce dependence on only advertising. (more)

RCom: Will the monetisation plan work?

RCom has also talked about monetising its real estate but that is easier said than done

Anil-Ambani led Reliance Communications' offer to lenders to take control of the company by converting Rs 7,100 crore of its debt into a 51 per cent equity stake is perhaps the telecom major's best bet. If the latest rescue attempt goes through, lenders led by SBI will hold at least 51 per cent in the telco and promoters stake will be halved to around 26 per cent.

RCom has said it will get about Rs 17,000 crore by monetising its assets. The plan includes selling its tower business, fibre network, and media convergence nodes and it will estimates another Rs 10,000 crore through real estate sales in eight cities. Post debt monetisation, the company said it would have only Rs 6,000 crore of debt left. Moreover, another Rs 4,000 crore taken from unsecured creditors like Ericsson needs to be negotiated with.

So how prudent is this monetisation plan?*

Under its earlier plan, RCom had said it would cut its debt by half by December through a merger with Aircel and sale of majority stake in its tower business to Canada-based investment firm Brookfield Infrastructure for Rs 11,000 crore, valuing the business at Rs 20,000 crore. However, now that the Aircel deal is off and RCom shutting down its 2G business, which constitutes for a bulk of its subscribers, the deal valuation is likely to be revised downwards. In essence, the telecom tower deal is subject to a new valuation given that Aircel’s tenancies will not be included in the deal anymore. Moreover, RCom now runs the risk of losing at least half of its 2G subscribers.

Also Read : New Year disruption plan: Now, Reliance Jio moves to broadband, TV space

Analysts say that even if RCom sells the entire 100 per cent stake in its 43,600 tower assets to Brookfield it will not fetch them more than Rs 8,000 crore.

RCom is hoping that it will be able to rake in Rs 14,000 crore from its spectrum sale though the value of the spectrum is Rs 26,000 crore, which includes spectrum it got from the merger of MTS. However, analysts are of the view that there is already a huge oversupply of spectrum, and that the paper price might not be reflected in reality. RCom may also not find many takers for its spectrum given how things went down with Telenor and TTSL which gave their spectrum virtually free to Bharti Airtel. (more)

Rs 2500 JioPhone @ just Rs 1500! How RIL is planning to recover losses

Jio has amassed more than 128 million subscribers since its launch last year

Reliance Industries' telecom upstart Jio is footing at least 40 percent of the cost of its basic 4G phone, two sources familiar with the matter said, as it bets on recovering the investment by luring in millions of new customers.

The Jio Phone, rolling out this week for a refundable deposit of 1,500 rupees ($23.05), will cost at least 2,500 rupees ($39) to assemble, the sources told Reuters.

That means Jio will likely carry more than $150 million in costs for every 10 million JioPhones it sells.

And the company aims to build a subscriber base of between 250 million and 300 million users in the next two years, said one of the sources.

Reliance Industries did not respond to a request for comment.

Some Reliance investors may flinch at the cost of subsidies, but the scale of the outlay is a clear signal of the level of Jio's ambition, as it targets an audience of some 500 million who still cannot afford smartphones in India.

Also Read : Nokia 8 with dual rear camera launched in India at Rs 36,999

Jio's advanced voice over LTE (VoLTE) network only works with 4G enabled devices, inaccessible to many even at subsidised rates. The significantly cheaper JioPhone, however, will open the Internet to a less affluent segment of Indians for the very first time.

"The 3,000-rupee smartphone was not cutting it," the second source said. "Reliance is making a bold attempt with this phone and data will be the key driver for them."

Analysts estimate a majority of Indian feature phone users have an average revenue per user (ARPU) of rupees 50 or lower. JioPhone's 153 rupees monthly plan for so-called pre-paid users aims to drive up this ARPU, the first source said.

Jio, backed by India's richest man Mukesh Ambani, has amassed more than 128 million subscribers since its launch last year, by offering free voice and cut-price data for months.(more)

Airtel unveils fresh packs to counter Jio heat

Days after Reliance Jio extended its free services, mobile operator Bharti Airtel today came out with two prepaid offerings, including a Rs 145 pack, that will offer free unlimited local/STD calls along with 4G data.

While Airtel's Rs 145 pack offers 300 MB 4G data along with free unlimited Airtel-to-Airtel local/STD calls, its Rs 345 pack offers unlimited free local/STD calls to any network in India and 1GB 4G data.

Both packs have a validity of 28 days and are available for customers across the country.

Mukesh Ambani's Reliance Jio -- which garnered 52 million customer base in the first three months of 4G launch -- recently announced extension of free domestic voice calls and data till March 31, 2017. Even after March, the company would offer free calls for life to its 4G customers.

Industry watchers are of the view that extension of free services by Reliance Jio will add to the woes of the industry which is already reeling under Rs 4,25,000-crore debt.

Ajai Puri, Director - Market Operations (India and South Asia), Bharti Airtel said, "This is another initiative from us to bring innovative bundle offers to our customers in line with our endeavour to provide the great value backed by a superior network experience."

Besides free calls on same network, the Rs 145 pack offers 300 MB data to customers who have 4G-enabled mobile phone, and 50 MB data to customers with handsets suited for web surfing and accessing light social media applications. Read more.

The 4G era: Will it change the game for media firms?

The data party just began. Earlier this month, Vodafone launched its 4Gservice in Kerala. This Sunday, Mukesh Ambani-controlled Reliance Industries launched Lyf, its 4G-enabled phone, and its Jio 4G services - only for employees currently. A full commercial launch is due in end March or early April 2016. Just before Jio, came Idea. Airtel and Aircel have already launched their 4G services.

4G, or LTE as it is called globally, compresses huge amounts of data making it easier to transport it over the airwaves. This means “better speeds and, therefore, more video consumption. And anything that pushes up video consumption is good for us,” says Sudhanshu Vats, group CEO, Viacom18 Media.

That is an understatement. 4G, say analysts, is the single biggest game changer in the Rs 100,000-crore market for media and entertainment in India. Largely because it could trigger massive consumption of mobile video, expanding the market for everything - from films and music to newspapers and TV shows. And because it brings the big boys, the telecom and broadband network operators, back into the media game.