Watching the Reliance Industries Limited (RIL) AGM reminded me of the cliched term “data is the new oil” being literally translated into reality by the company. While non-core diversification is a subject of much debate, RIL has exploited its core competency of executing on innovative business models for capex-intensive large infrastructure projects and expanded into sectors which on the face of it look unrelated. This has led the Mukesh Ambani-led RIL to dominate the sectors it has got into, dislodge incumbents, and create entry barriers for new players. The metamorphosis of the oil and petrochemicals giant into India’s second-largest telecom service provider in a span of just four years is a classic case study. Careful planning and even better execution have resulted in Reliance Jio changing the telecom landscape in India.
The acquisition of several media companies starting with Network18 and subsequently acquiring majority stakes in Den Networks and Hathway Cable & Datacom has made it the third largest media house in the country. Further, RIL has made investments in several movie and music content companies to meet the insatiable Indian consumer need for entertainment, such as merging Jio Music with Saavn and acquiring stakes in Balaji Telefilms and Eros. This sector needs deep pockets to sustain itself and RIL is positioning itself as a leader that can produce/source original content and distribute OTT content across telecom, cable, and dish networks.
Another behemoth being developed is in the retail space. RIL is already the largest retailer in India, made possible through both inorganic and organic growth. With string of 40+ partnerships with international luxury brands, RIL is positioning itself to meet the needs of every customer segment. It is now cementing its position further by digitising kirana shops, strengthening the grocery sourcing infrastructure and launching its “new commerce” platform, JioMart. This brick-and-mortar and e-commerce model could pose a formidable challenge to Amazon in a country like India.
The most interesting foray is RIL entering the software platform business. The company has been in the headlines for the past few months with 14 marquee investors being convinced of the Jio Platforms story and investing ₹1.52 lakh crores into it, valuing the entity at $65 billion. The platform story started almost three years ago when RIL spent $3 billion in a string of acquisitions and investments in the areas of mixed reality, artificial intelligence, the Internet of Things, blockchain, online multiplayer gaming, multi-party videoconferencing.
The AGM showcased some of the solutions coming out of the stables of the acquired companies. Many of the technologies being developed by these organisations will be used to improve the efficiency of its core businesses like the investment in Asteria Aerospace—a robotics and artificial intelligence company that develops drone-based solutions—which surely will start playing a role in retail delivery or healthcare.
The most interesting thing to watch in the coming years is how RIL will string these “pearls” together. The Indian market would provide more than enough opportunity to innovate, that would make the applications and technology battle ready to take on global giants, for example to ensure applications developed will work in a low-bandwidth scenario. There would be opportunities along the way—like the launch of JioMeet, capitalising on the need to work from home—and these would provide a bump to the business as well. Surely, if these solutions are combined into an integrated offering, it could create another significant barrier. The only challenge that RIL will have to deal with in this this space would be to tackle the cost-conscious Indian customer, who may not go beyond the basic software pack that would be free and may not necessarily pay a higher amount for incremental features or benefits. As an illustration, in the U.S., ARPU is at about $38, while the Jio ARPU was around $1.7. So, it would be exciting to see how RIL will drive innovation technically and commercially in this space.
There were two other interesting announcements: 5G technology being ready; and the launch of a mobile phone with a Qualcomm chipset, running Android, developed jointly with Google. Both these initiatives could play to RIL’s core strengths and potentially establish a completely new path for India’s electronic industry if the company decides to move into electronics manufacturing.
India has lost out to China-Hong Kong-Taiwan in the electronics manufacturing space. While there has been significant growth in mobile manufacturing plants in India since 2015, these units primarily assemble phones, with almost 88% of the components being imported—of which 85% are from China. If RIL decides to embark on manufacturing mobile phones in India—including component manufacturing—and achieves significant size and scale, it will shape a new industry that will be critical for the next few decades. Further, if RIL can move further into the semiconductor space, this will set out a path for India to be a giant in this space. Semiconductor manufacturing has been a key investment sector for the Indian government, but most companies are cautious of making investments unless there is availability of reliable power and clean water, which RIL with its expertise in large-scale projects can ensure.
With the 5G announcement and the ongoing ban of Huawei by various governments, there could be a window of opportunity to take control of the telecom network equipment market as well. The 5G software stack is relatively easy to deliver but moving into manufacturing of the physical devices will need capital and scale which a company like RIL could execute. Additionally, this foray into electronics manufacturing will also align with its investment in Asteria Aerospace to manufacture drones.
RIL has set out its vision for the next decade and the belief in the story by the various investors is not misplaced. If the scorching pace at which Reliance Retail and Reliance Jio have got off to is any benchmark, one can expect exciting things from the digital platform space.
Views are personal. The author is chief marketing and strategy officer, Microland.
