After Facebook, now Google joins hands with Mukesh Ambani; buys 7.7% stake in Jio for Rs 33,700 cr

“Because of Jio’s converged all-IP network architecture, we can easily uprade our 4G network to 5G.”

Tech giant Google on Wednesday followed into the steps of Facebook by investing Rs 33,737 crore into Jio Platforms for a 7.77% stake, thereby setting the stage for the next phase of Reliance Jio’s journey. The investment by Google was the fourteenth in a series of such deal in the last thirteen weeks and takes the total stake sold in Jio Platforms to around 33%. The company has now raised a combined Rs 1,52,056 crore from some of the world’s leading tech investors in what can be called the largest fund-raising exercise by a company.

The partnership with Google will enable the company to manufacture affordable, entry-level smartphones to upgrade around 350 million 2G users and improve its average user per revenue as well as data usage per customer. Google will see its user base broadening in the country, which would enhance its revenue when it comes to buying apps and other updates from its playstore.

“There are many feature phone users waiting to upgrade to a conventional smartphone. We believe we can design an entry-level 4G or even a 5G smartphone. We believe that we can design such a phone at a fraction of the current cost,” Mukesh Ambani, chairman, Reliance Industries (RIL), said at the company’s annual general meeting. “To power such a value-engineered smartphone, we also need an equally value-engineered smartphone operating system. And, such an operating system must be designed from grounds-up. Google and Jio are partnering to build a new smartphone operating system in India,” he added.

Analysts maintain that while the synergies are perfect, going ahead a tight-rope walk needs to be maintained by Jio as both Facebook and Google are now invested in the company and both have products which compete with each other. For instance, if WhatsApp is looking at starting its payment app in the country and scale it up, Google is already present in the segment through Google Pay.

Another major announcement made by Ambani was the development of a Made-in-India 5G solution that can be ready for field deployment next year. With the border tension with China and global pressure on the country by the US to ban Chinese vendor Huawei, the timing is perfect. “I have great pride in announcing that Jio has designed and developed a complete 5G solution from scratch. This will enable us to launch a world-class 5G service in India using a 100% homegrown technology and solution,” Ambani said, adding, “Because of Jio’s converged all-IP network architecture, we can easily uprade our 4G network to 5G.”

However, it needs to be seen whether the 5G solution made by Jio finds market with other players in the country and in markets outside India, since apart from Huawei other global players like Nokia and Ericsson are well entrenched in this market.

Way back in 2018, Jio had launched a low-end phone JioPhone aimed at low-paying subscribers who could not afford smartphones and, therefore, used feature phones. Though JioPhone is a 4G phone, it does not have features like downloading apps, etc, so apps like Facebook or WhatsApp need to be built into them at the manufacturing stage itself. The consumers use such apps to the bare minimum and therefore Arpu and data usage do not see a surge. Ambani said that around 100 million JioPhones have been sold till now. With Jio having a higher subscriber base than Bharti Airtel, if one looks at the January-March numbers, its Arpu at Rs 131 was much lower than Bharti’s Rs 154. Even the data usage per customer of Bharti was higher at 14 GB a month compared to Jio’s 11 GB. With the move to tie-up with Google and bring about a smartphone which would replace the JioPhone, the trend can be reversed.

However, analysts feel that the challenge would come while pricing the smartphone. Ambani on Wednesday did not divulge the price as it needs to be worked upon.

“In the next three years, I can see a strong path for Jio to connect over half a billion mobile customers, over a billion smart sensors, and over 50 million homes and business establishments,” Ambani said.

Commenting on the new partnership, Google CEO Sundar Pichai said, “Through this partnership with Jio Platforms, we see the chance to have an even greater impact than either company could have alone. This partnership is a key part of the next chapter of investment in India…Our investment of $4.5 billion in Jio is the first – and the biggest – investment we will make through this fund (of $10 billion announced on July 13).”