Jio GigaFiber will be launched across 1,100 cities of India simultaneously.
Reliance Industries Ltd (RIL) chairman Mukesh Ambani has launched JioGigaFiber, a wired broadband service, during the 41st annual general meeting (AGM) of the company on Thursday.
Currently available in selected cities, Jio GigaFiber will be launched across 1,100 cities of India simultaneously making it the largest fixed-line broadband fiber launch in the world.
"At Jio, we are determined to take India to be among the top-five in broadband connectivity, both for mobility as well as fiber-based wireline connectivity," said Ambani. "We have built future-proof networks and will continue to deliver the most advanced technologies to our customers for decades to come," he added.
Kritika: Let us talk about Jio giga fibre. The Jio giga fibre is expected to come bundled with data and voice. They are likely to use Voice over Internet Protocol (VoIP) how much disruption is this likely to cause to the existing telecom players and do you believe that there is going to be change in pricing by the existing telecom players?
Mathews: Very clearly, this is a game changer of sorts in terms of the pivot that Reliance has done in terms of focusing from its existing business to a platform based approach. One of the things that Mukesh Ambani has highlighted is the continuing convergence of multiple industries on the single platform that is going to deliver the end services.
So, in that sense this is good news for the industry because more and more services are looking to be aggregated and that gives hope for increase in the amount of money that the average customer pays. I think one of the critical points that Mukesh Ambani made is that he is moving towards subscription based approach of revenue and that is of course the crux of what telecom service providers do. Number of subscriber’s times the rate is basically what pushes the subscriber model and it continues over a period of time. So, in that sense that is good.
More services being aggregated on the single platform. The platform itself being positioned for the new stuff that is coming down the pipe like 5G, that is why he talked about health, he talked about education, he talked about agriculture things that will now benefit from the state of the art investments in this telecom infrastructure.
So, overall I think he is positioned in the industry very well for taking advantage of the opportunities that are coming down the pipe.
Reema: Since Jio ventured in to the telecom business, we have seen Idea Cellular report losses now for six straight quarters, Bharti’s India wireless business reported a loss at the EBIT level. On the whole for the industry, the aggregate revenues are down by nearly a quarter in the last six quarters or so. The next target for Jio appears to be e-commerce as well as cable. Your thoughts on the kind of disruption it can cause on cable in particular and broadband. Will we see the exit of smaller players, is consolidation going to take place there?
Pai: When Jio came out 1.5 years ago with its big launch, I said that this is going to cause a loss of Rs 50,000 crore in revenues to all the big players. It has come true. However, that Rs 50,000 crore is a consumer surplus that has gone to the consumers. Jip produces Rs 90,000 crore of EBITDA every year, out of maybe Rs 50,000 crore could be free cash flow which could be invested back.
Now with this announcement that they are going to take on retail, I think the battle for retail is going to intensify. I had also said when Walmart bought Flipkart that they have to look at the big gorilla in the room. The big gorilla is not Amazon, the big gorilla is not going to be Walmart, the big gorilla is going to be Reliance.
Reliance already does $10 billion of retail and now they have got a connection into 215 million consumers, it will go up to $500 million by 2020. If it goes to $500 million by 2020, on subscription they can offer fantastic deals. All the mom-and-pop stores, all the retail stores in this country will be connected to them for e-commerce and they will have their backend supply chain which is already there. So their ability to aggregate all purchases, demand greater prices, and sell it to all the people on their system and give lower prices is enormous.
If you look at the other two players, they have come up by giving fancy discounts. One of them gets most of the revenues by selling cellphones and electronic gadgets which are standard products and the sale depends on the discount that you give.
Reema: Let us talk about the bloodbath of the existing players in the industry. The two listed names, Hathway as well as Den Networks in the cable and the broadband space, do you see them existing? Will we see consolidation? How would you approach these stocks from a trading and investing point of view now?
Bhasin: The reach which Mukesh Ambani has signaled out, Rs 2.5 lakh crore which has been spent and the broadband and the fibre network which he is talking of, is really going to be creating a behemoth. I think the smaller players will have to either consolidate, merge or just evaporate. This is now going to even threat the likes of Netflix.
We think Amazon and Netflix are going to see lot of competition. Reliance is now going to be the readymade behemoth which you can see in anything to do with technology and e-commerce. I think for the local players it is going to be a really tough time. I think the smaller players in the broadband are going to be either like I said merged or they will have to tie up or just vanish because you cannot survive in this type of environment which Reliance is looking to create.
Kritika: You have been observing this space for a very long time. If you look at the existing model that Netflix, Hotstar etc follow, they are content makers, content aggregators but over here in the case of Reliance Jio, you have content makers, aggregators as well as internet providers, will this give them a leg up or is it a completely different model altogether?
Uppal: There is no doubt that it will give them a leg up. There is no doubt that they bring a huge literal and metaphorical bandwidth to this space, they bring money to this space and they bring huge ambition to the space. There is absolutely no doubt in my mind that it is going to be tough going for the small players in India and this applies as much to the telcos as it does to the people in the cable space etc.
However I am not too sure whether we can extrapolate as easily as that to the likes of Amazon and Facebook or Netflix etc because they have a huge advantage of incumbency, they have been in this business for much longer and it is probably fair to say that this is not an area of great expertise as of now for Reliance.
This expertise is possible to acquire, it is possible to buy, that is a different matter. However to suggest that everything is hunky dory and that it is just a pace ready to be overtaken by somebody with ambition and money alone, I think might be overstating it. However I think Reliance is going to give a lot of players including the big ones a run for their money.
Reema : We are talking about e-commerce players like Flipkart and Amazon getting impacted once Reliance Jio does the horizontal integration of Reliance Retail on its Jio network. Currently, these big players are all loss making. Financially what does this integration or hybrid offline online model mean for Reliance Industries?
Gogia: I am very cautiously optimistic about entire announcement today. While of course it is a very strong announcement in terms of the amount of dollars and the money which is going in the entire system but let us not forget inherently Reliance is not a B2C company in terms of the broader understanding of customer experience and delivering that kind of an experience that probably an Amazon or Netflix or a Flipkart offers today isn't inherently close or native to a Reliance.
Just to put this in context 80 percent of the business does come from oil and gas still which does make its thought process and culture very different. Even if you look at the response to Jio apps it has been tepid, it has been slightly on the poorer side and Jio overall is mostly a second connection for a lot of people. So yes while Airtel and Idea Cellular of the world are losing money because a lot of correction is happening in terms of prices but Jio still happens to be for a lot of consumers in the industry the second option.
Having said that Reliance does come in with very inherent strong points. It does have 4,000 Reliance Retail stores. It has about 50 warehouses, it has 4,000 Jio points. It also has to its great advantage million plus shop selling Jio connections as last mile fulfilment centres in smaller towns. The fact is if you look at cross any e-commerce company today be it Flipkart, or be it even Amazon - tier II, III and IV cities are the ones that offer a lot of bullish opportunity in terms of growth and that happens to be the home turf for Reliance. So, it does add up that it is going to be jolt to the industry but I am a lot more cautiously optimistic about what has happened today.
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