Asia News Jul 15

Reliance unveils 5G ambitions, Google stake

American tech giant buys stake in Indian conglomerate to advance its Asian ambitions

Reliance unveils 5G ambitions, Google stake
The Long View: Reliance chairman Mukesh Ambani sees Google tie up as key to 5G plans.

(ATF) Oil-to-telecoms conglomerate Reliance, is teaming up with Google to bring a billion people online and grab pole position in India’s burgeoning digital economy.

Reliance Industries chairman Mukesh Ambani, Asia’s richest man, told his company’s first-ever virtual AGM on Wednesday that Google will buy a $4.5 billion, 7.7% stake in his company's digital unit and jointly develop an entry-level smartphone with the Indian conglomerate. He also unveiled plans for an indigenously designed 5G network.

Ambani said the two firms will develop "an Android-based smartphone operating system" and that "India is at the doorstep of (the) 5G era."

Sundar Pichai CEO, Google and Alphabet, tweeted: “Everyone should have access to the internet. Proud to partner with @reliancejio to increase access for the hundreds of millions in India who don’t own a smartphone with our 1st investment of $4.5B from the #GoogleForIndia Digitization Fund.” 

READ MORE: Digital arm of India’s Reliance draws investors

Major players including Facebook, Intel and others have already ploughed some $15 billion into Jio Platforms this year, as Ambani seeks to take on US giants Amazon and Walmart in India's growing online retail sector.

Kotak Securities analysts said ahead of the meeting, RIL’s leadership in connectivity and retail businesses and recent strategic partnerships would allow it to further expand its presence in India’s digital ecosystem, which can create significant value in the long run.

“We expect the foray in digital commerce business to be the next big driver of RIL stock, with the valuation of legacy O2C and digital services segments broadly established in a reasonable range for now,” they said while adding that recent developments had propelled it to the forefront of consumer-facing digital ecosystem opportunity in India. 

ENTRY LEVEL 5G SETS

The company is preparing to dominate the growing digital economy with cheap handsets. Only 500 million of India’s 1.4 billion population use the Internet – a guage of the untapped potential.

"We believe we can design (an) entry-level 4G, or even 5G smartphone, for a fraction of its current cost," Ambani said, vowing to "make India free of 2G".

 Google's chief executive Sundar Pichai said in a pre-recorded video message released at the meeting. "Our goal is to bring a billion Indians online."

Reliance is locked in a fierce battle with Amazon and Walmart for a share of India's e-commerce market, and Ambani's plan to launch an affordable smartphone will see him compete with Chinese manufacturers who already have a strong foothold in the South Asian nation.

"The target is Chinese smartphone makers," Forrester Research senior forecast analyst Satish Meena told AFP. 

"Reliance wants to give tough competition to the Chinese companies in the smartphone category and that is something they will build towards." 

Prime Minister Narendra Modi -- seen as an ally of Ambani -- has long pushed a "Make in India" strategy and urged foreign businesses to manufacture goods locally.

He has also asked domestic consumers to "go vocal for local".

Ambani also announced plans to launch 5G services in India next year, and said the company would look to export the technology once it had been deployed across the country. 

"This is made in India and home-grown technology and will be available as soon as 5G spectrum is available," he said.

DEBT FREE STATUS

Last month, the company said it had become net-debt free after raising 1.69 trillion rupees ($22.2 billion) via stake sales in its digital unit and a share sale over the past two months.

Ambani, who upended India's telecom sector after launching the Jio mobile service in 2016, is looking to roll out an e-commerce initiative that will tap into its huge 388 million-strong subscriber base.

Jio's mobile offering clobbered the competition, offering huge discounts on its services and forcing rival firms to crash out after they were unable to keep up.

The 63-year-old businessman, whose wealth ballooned on the back of India's telecoms boom, lives with his family in a 27-storey luxury Mumbai skyscraper reputed to have cost more than $1 billion.

Wednesday’s deal followed Google's announcement on Monday that it would invest $10 billion in India over the next five to seven years.

READ MORE: Reliance sells $1.5-bn stake in drive to become debt-free