Reliance Industries is set to pour Rs 60,000 crore capital in its telecom business, Jio, this fiscal year as the company wishes to roll out its broadband services and expand its wireless network faster, according to two people close to the company.
Additionally, Reliance Jio Infocomm Ltd might also borrow the astronomical sum of Rs 1 trillion, according to those sources who wished to remain anonymous.
“This is being done as Jio wants to fast-track its plan to scale up its capacity and coverage which would require further infusion of funds,” said one of the sources.
Anshuman Thakur, head of strategy and planning at Jio did reveal in an interview on 27 April that the company would keep investing on laying fiber even though it already had the largest optical fiber network in India.
“In terms of total investment, we don’t normally say such figures, but it is the largest network in the country, on both intra city as well as inter-city (fiber). We have a substantial advantage over all operators. But, we will keep on building fiber. We are gradually rolling out our FTTH (broadband services) and other services, during the course of which we will be laying much more fibre,” he said.
“On the tower (side), we have identified this phase of network roll-out. Beyond that, it’s the capacity side (where the investments)… will be required. We are well equipped to put towers on our own if others don’t want to give us. But, if they give us, you know every tower we will have to decide whether we should build on our own or lease it from others,” Thakur said.
The funds once raised will permit Reliance Jio to keep its prices as low as possible, therefore exerting more pressure on its competitors, who are already burning colossal amounts of capital as they try to stay relevant in the current market pricing. The firm also publicized its intentions of providing customers with better valued services meant to drive customer engagement instead of trying to recoup capital in short-term revenue strategies. A statement that means the company is ready to reduce prices even further if rival operators try to drop theirs.
“RIL may have to keep pumping in money through a combination of equity or raising of debt. Though, the investments may not happen at the same intensity as it happened in the initial years of Jio’s rollout, the management indicated that Jio will focus more on fiber-to-the-home, enterprise offering, Internet of things services and other digital services. These segments would need investments going forward,” according to an analyst tracking RIL based in Mumbai.
Reliance Jio will stay loyal to its strategy of investing predominantly in content as it considers this the standout feature of the company. Additionally, Jio is almost set to launch its commercial home broadband services, which will be gradually rolled out in Indian houses.
For the first quarter report of the year, Jio reported a 1% growth in profit as compared to the December quarterly report. Its average revenue per user also fell to Rs 137 in the March quarter compared to the Rs 154 it generated per user in the Oct-Dec quarter.
“Clearly, Q4FY18 numbers demonstrate that RJio is no longer insulated from competition and any rise in the same would hurt RJio equally or probably more than the incumbents,” ICICI Securities said in a 30 April report.