Mukesh Ambani has spent years trying to turn his inherited oil business into a tech empire. In 2020, that pivot really kicked into overdrive.
Between March and November last year, even as the coronavirus upended lives and devastated economies around the world, India’s richest man was handed more than $27 billion to make a bet on the future of the internet.
More than half that eye-popping amount came from Silicon Valley. It started with $5.7 billion from Facebook in March, one of the biggest investments in the American company’s history. Silver Lake Partners, the private equity firm based eight miles from Facebook’s (FB) Menlo Park headquarters, followed with its own investment just weeks later, as did Palo Alto’s General Atlantic and San Francisco-headquartered TPG Capital.
Smaller investments from Qualcomm (QCOM) and Intel (INTC) came next, before Google (GOOGL) swooped in with $4.5 billion to swell the impressive war chest.
The recipient of all those billions is Jio Platforms, part of Ambani’s sprawling conglomerate Reliance Industries. Jio started as a mobile network in 2016. Since then it has amassed around 400 million users and launched a streaming service, a video conferencing app, a fiber broadband network and digital payments.
Its super-cheap data has helped bring hundreds of millions of Indians online for the first time. When Ambani launched Jio, India had fewer than 350 million internet users. Now, it has 750 million.
“A lot of this change, especially in terms of bringing people online, has happened on the back of the positive disruption that Jio triggered,” Ajit Mohan, Facebook’s vice president and managing director in India, said. “Jio has been the hero in that story in terms of providing that access, and I think that sets the context for our investment and Jio and our partnership, because… we saw alignment of the vision.”
Ambani’s vision keeps getting bigger.
After raising more than $20 billion for Jio Platforms, Reliance went courting investors for its retail business. Between late September and early November, Reliance Retail raised around $6.4 billion, much of it coming from Jio investors including Silver Lake, General Atlantic, TPG as well as the sovereign wealth fund of Saudi Arabia.
Ambani’s retail chain is the biggest in India, with more than 12,000 stores. And he has made no secret of his ambitions to combine his retail and tech empires to take on two big US players. Amazon (AMZN) and Walmart’s (WMT) Flipkart dominate online shopping in India, controlling more than 60% of the market between them. Ambani is making an aggressive play for a slice.
He’s doing that with JioMart, an initiative announced in 2019 to bring online thousands of India’s mom-and-pop stores known as “kiranas.” And Reliance Retail recently acquired one of its biggest Indian rivals, Future Retail, for $3.3 billion — a deal that has kicked off a protracted and complex legal battle with Amazon.
Even as he digests all of that, India’s richest man is already looking to the next big thing — bringing 5G to India in the second half of 2021.
“It will be powered by an indigenous developed network, hardware, and technology components,” Ambani told a virtual audience at the India Mobile Congress in November, in a possible nod to calls for China’s Huawei to be excluded from building the country’s 5G network.
Any one of those plans on its own would be a big undertaking and executing them all together is a huge ask even for one of the world’s top billionaires. His ambition is to fundamentally transform the way more than a billion people communicate, do business and make purchases.
And the ultimate goal is to reach billions more.
“We are creating compelling homegrown solutions in education, health care, agriculture, infrastructure, financial services and new commerce,” Ambani said in his speech. “Each of these solutions, once proven in India, will be offered to the rest of the world to address global challenges.”
Geography vs Technology
But the billionaire, who is reportedly looking to take Jio public in the United States, may find it challenging to parlay the company’s meteoric rise in India into success on the global stage.
“Reliance does not have any one area where it has a technological edge and superiority like say Google’s search, Facebook’s portfolio of social networks, Amazon’s e-commerce engine, Alibaba’s combination of strengths in e-commerce and payments or Tencent’s super app,” said Ravi Shankar Chaturvedi, research director at the Institute for Business in the Global Context at Tufts University’s Fletcher School.
Rather, Jio’s dominance has been largely geographical, helped by a regulatory regime that supports homegrown players.
“One would be hard pressed to come up with a meaningful list of technological innovations and IP that Jio created that could be the basis for its expansion abroad,” Chaturvedi added.
India is, of course, a massive prize in itself that Jio has largely already captured.
The country’s online population of 750 million — second only to China, which has shut out US companies for decades — is the biggest draw for global tech. Facebook, Google, Amazon, Netflix (NFLX) and Uber (UBER), to name a few, have already spent several years and billions of dollars to crack open the market.
“For Silicon Valley, the Indian market alone is bigger than the five next biggest consumer markets — by population — in the world combined,” said Chaturvedi.
Where China has its “Great Firewall” of online censorship that keeps out US tech companies en masse, Ambani has succeeded in creating a “Great Indian Paywall” that runs through Jio, Chaturvedi argues.
Global tech firms have been forced to navigate a series of regulatory hurdles from an Indian government that has shown a greater willingness to clamp down on foreign players — whether blocking Facebook’s efforts to provide free internet, changing how companies can store and collect data or, more recently, shutting out Chinese tech companies over a border dispute.
Ambani has been the biggest beneficiary of many of those regulations, and the billionaire has been a vocal champion of Indian Prime Minister Narendra Modi and his campaign for a “self-reliant” India.
A few cracks — albeit small ones — have started to appear in Ambani’s dominance. Barely a day into 2021, the Securities and Exchange Board of India ordered Reliance Industries and Ambani to pay a $5.5 million fine over what the regulator described as a “fraudulent and manipulative trading scheme” over a former subsidiary in 2007.
But that’s unlikely to dent his tech ambitions. Ambani, who declined multiple requests to be interviewed for this article, is used to making audacious bets and having them pay off — usually with enormous resources at his disposal and a fair political wind at his back.
“After all he’s India’s richest man, he has therefore the deepest pockets in this country,” said Paranjoy Guha Thakurta, journalist and co-author of Gas Wars: Crony Capitalism and the Ambanis. “I can say without any risk of contradiction that he has been supported by a favorable political dispensation and a regulatory regime,” he added.
From Oil to Jio
The corporate empire that Ambani presides over today looks rather different to the one he inherited.
His father, Dhirubhai, started a small yarn trading firm in Mumbai in 1957 that he subsequently spun into a thriving textile business. Over decades, it grew into the sprawling conglomerate Reliance Industries spanning energy, petrochemicals and telecommunications. Dhirubhai’s death in 2002 kicked off an acrimonious succession battle that split the business in two.
Mukesh Ambani ultimately took over the company’s main oil and petrochemicals assets, while his younger brother Anil assumed control of the newer ventures, including telecom and digital businesses.
Then, in September 2016, Mukesh Ambani stormed onto his brother’s turf with an offer that blew the lid off India’s telecom and internet growth. Jio gave every new customer six months of free 4G internet and Indians signed up by the millions, triggering a brutal price war.
“You lure your users by giving something free, and once they’ve got hooked onto it, you gradually start increasing the prices,” Thakurta said. “It’s the classic way all kinds of monopolies work across the globe.”
One of the major casualties of the price war was Anil Ambani. His Reliance Communications company announced in late 2017 that it would sell most of its assets and exit the mobile business. Two days later, Jio acquired Reliance Communications. And two years later, the elder Ambani underscored the divergence in the brothers’ fortunes by helping pay off an $80 million debt to Ericsson (ERIC), keeping Anil out of jail.
Jio’s meteoric rise has helped offset some of the volatility in oil that cost Ambani billions last year and set up Reliance for a future that’s further removed from its core business. In fact, a company spokesperson previously said that the name Jio — which means “to live” in Hindi — was chosen in part because it’s a mirror image of the world “oiL.”
The bold attempt to transform his $170 billion conglomerate faces a massive test in 2021 as the Indian economy recovers from its first recession in nearly a quarter of a century. Like other tech companies around the world, Jio has strengthened during the pandemic, but the question is whether it can continue to grow fast enough for the company to meaningfully transition away from oil.
Ambani charted his course years ago.
“Data is the new oil,” he said in 2017, just six months into his campaign to disrupt India’s tech landscape.
India first, then the world
For American tech giants, having a big homegrown player in your corner often makes life easier in a foreign country, and Jio is by far the biggest in India.
“Why did Facebook, why did Google…put in their money in Jio at a time when the world economy is in a mess, the Indian economy is in recession, why would they do it? Obviously because there is more than an economic angle,” said Thakurta. “It’s also I believe, indirectly… a political insurance of sorts.”
Mohan, Facebook’s India head, denied that government regulation was part of the conversation.
“That didn’t have anything to do with our investment in Jio or the partnership,” he said. “It really did come from recognizing that this was a special company that had done pretty amazing work in transforming the digital infrastructure of India in a short period of time.”
From Ambani’s perspective, a wide-ranging coalition of some of the biggest names in tech is just a way to further Jio’s command over all aspects of India’s internet.
The company already controls a lion’s share of the pipes through its vast mobile network. Through Facebook, it is working to integrate JioMart with WhatsApp, the only platform in India with a user base comparable to Jio’s. With Google, it’s gunning for control of mobile devices by jointly developing an “entry level, affordable smartphone” for India’s huge middle class. And it’s even got an eye on the chip technology that underpins those networks and devices through partners such as Qualcomm.
“As digitization of the Indian economy and Indian society picks up speed, the demand for digital hardware will grow enormously. We cannot rely on large-scale imports,” Ambani said last month. “I clearly foresee India becoming a major hub for a state-of-the-art semiconductor industry.”
Qualcomm, a longtime Jio partner, joined the investment bandwagon by spending around $97 million in July for a 0.15% stake. Jio’s commitment to building out its own network while also developing a smartphone presented the chipmaker with a unique opportunity to get involved on both sides of Ambani’s internet access plan, according to Quinn Li, senior vice president and global head of the company’s investment arm Qualcomm Ventures.
“If you look at operators across the world, not many are that vertically integrated,” he said. “Given we’re the technology supplier to the industry, we’re I think best equipped to work with Jio both on the device front as well as infrastructure.”
Ambani appears ready to leverage the global backing for Jio and Reliance Retail into IPOs, saying in June that he would “move towards listing of both these companies within the next five years.” An IPO for Jio Platforms on Nasdaq could come as soon as 2021, according to several media reports and industry analysts. Reliance did not respond to a request for comment on its IPO plans.
“I wouldn’t be surprised in the least,” said Thakurta. “Once you’re on Nasdaq, you give all these investors a good exit route.”
Ambani seems confident he can get the world to buy into India’s moment, anchored in his company. And given his track record so far, he has no reason not to be.
“Friends, we are about to step into a glorious decade of the India story,” he declared. “Nothing can stop India’s rise, not even Covid-19. This is our chance to create history.”