Reliance Jio Beefs up Backend Infrastructure in Time for 4G Launch

India’s already crowded telecom market is about to get a new entrant – Reliance Jio Infocomm Limited (RJIL). The Mukesh Ambani owned company after investing over $11 Billion is all set to be the first company in India to launch nationwide fourth-generation or 4G services. RJIL, a unit of Reliance Industries Limited (RIL) has commenced installing backend infrastructure to support nationwide services as September ’14 looks like a likely date for the launch. In February, the company spent $1.8 billion to buy airwaves to compete with Vodafone Group Plc (VOD), the world’s No. 2 by users, and billionaire Sunil Mittal’s Bharti Airtel Ltd.

India’s Huge Potential

India 893 million subscribers are set to grow as gaming and social networking on mobile continues to grow at break-neck speed. While this is immensely promising for companies entering or looking to enter the market, the other side of story is far more daunting. Bharti Airtel’s ambitious expansion has left the Sunil Mittal owned company with $9.3 billion in net debt and shrunk its profit by 75%. Nevertheless, Reliance Jio is continuously investing and looking to expand as it seeks to be the number one data provider in India. This also marks the return of India’s richest man, Mukesh Ambani to the mobile market after nearly a decade.

Infrastructure Build-Up

RIL is a conglomerate in the true sense of the word. The company, started by DhirubhaiAmbani in the 1960’ as grown from being a supplier of polyester yarn to one of the world’s biggest oil & gas companies in addition to spearheading a retail revolution and owning a sports team – Mumbai Indians.

Reliance Jio already has access to 1,69,000 towers through deals and sharing agreements signed with Bharti Infratel, Anil Ambani’s Reliance Communications and Viom Networks, a JV between Tata Teleservices and SREI Infrastructure Finance Ltd. In addition, manpower at the company is going to increased substantially. The total strength at present looks set to be tripled to 10,000 as the rollout nears.Also, RJIL has placed an order of 10,000 lithium batteries to SaftGroupe SA (SAFT), a French battery maker. Lithium batteries are used to contain the fuel pilferage that is prevalent in diesel-powered towers. This is being tested at 11 locations in Ahmedabad and Mumbai.

A Sign of Things to Come

Mobile is growing in India. Analysts continue to be optimistic about the overall market as they feel the Indian market is still untapped to a great extent. Smartphone shipments to India increased by more than 160% from 16 million to 44 million in 2013 as compared to 2012. The bigger picture however is that the overall percentage of smartphone users in India grew from 10% in 2012 to 22% in 2013; and this is growing every month. Many analysts including those at IDC feel that smartphone shipments to India will exceed those of China soon.

Data usage too has risen with the average user using between 200MB – 500 MB each month. In the coming months, expect India to be at par with the West as each user may average up to 1GB.

Investment

No one could have predicted how much the Mukesh Ambani owned company would invest in such a short time. With already $8 Billion invested, it’s likely to invest 300 Billion Rupees ($5 Billion) more in the coming months on account of higher spending on network infrastructure. In June 2010, Reliance had paid 48 billion rupees for the control of Infotel Broadband Services Ltd., hours after the company bid for nationwide wireless broadband licenses. Deep-pockets indeed!

According to post-quarterly results filed in December 2013, RIL had cash and equivalents of over $14.7 Billion – enough for its initial round of investments. While the operating income from the Oil & Gas sector, which contributes significantly to its yearly revenues shrank on account of unsurmountable hurdles in the KG-D6 basin, the numbers are still quite optimistic and investors remain upbeat about Mukesh Ambani’s company.

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