Data is new oil: RIL's move is not rule-changer but game-changer!

"Data is the new oil and India does not need to import it. We have it in super abundance and we have to ensure every Indian has access to it." Said by Mr. Mukesh Ambani (CMD of RIL) at Indian Mobile Congress which was held for the first time in 2017. If anyone had a doubt about the above statement by Mr. Ambani, it is now cleared after listening to the raft of announcements in 41^st AGM of RIL held on 5^th-July-18.

I read the full speech by Mr. Ambani and now I intend to do quick analysis of the digital initiatives announced in it and how it is going to possibly pan out and what may lie ahead.  

Digital initiative is all about the game of 3C .

The game of 3C :  Carrier – Content - Commerce

    

Death knell for low end feature phone manufacturers: Announcement of Jio phone 2 at Rs.2999 for new user & just for Rs.501 for existing Jio phone user in exchange of their Jio phone, may bring tremors in low-end and mid-end segment of smart phone segment which is majorly ruled by Chinese companies (having market share of 53% as per this article). The strategy is very simple here, to make diffusion of content (chat, videos, photos etc.) mind boggling in the country of 120+ crore of population, you first need to give to those who can’t afford the carrier/instrument/device (and hence the launching of Jio phone1) through which users can start consuming data. With the help of the common sense, we know that highest content consumption comes from three most popular apps YouTube, WhatsApp and Facebook – and Jio wants to tap into that –and hence the launching of Jio phone-2 with all these apps into it. I can anticipate that in future Jio will keep on rolling more such mobile–devices and certainly not only targeting for lower class but also for middle class. So, it looks like war has just started in this segment.

 Disruption in fixed line broadband space: RIL’s setting eye on the fixedline –broadband segment is going to be huge game changer. Players such as Telecom operators like BSNL, Airtel, Tata etc. and cable companies like Hathway and DEN Networks etc. and content providers like Star India, Balaji Telefilms, Zee Entertainment, Netflix, Amazon etc. will face strong competitive force. For Reliance the strategy is to control everything starting from creation of content (media & entertainment such as news18 and other channels which are owned by RIL), to the distribution of the content (through Giga fiber) and last is presentation of the content.(GigaTV, apps such as JioTV app, JioCinema etc.) Very fine analysis along with some counter –strategies against Giga fiber is provided in the article here in context with broader ecosystem of entertainment segment consisting of four parts; 1. Content 2. Format 3.Pipe 4. Terminal device. Bigger strategy is to control the space - be it home or office or any other space by providing television, telephony and internet through a single fiber. Surely, market- entry strategy for this will be similar to jio that is throwing up big discounts and range of promo offers to garner the market share. In country where, entertainment consumption habits are shifting from Channel/ hardware (TV)- based format to app- based or software-based format, JioGiga Fiber is going to pull hardest punch on its’ competitors.

New commerce platform: I feel that, RIL is going to be Amazon of India especially after reading this specific statement by Mr. Ambani in 41^st AGM – “As Reliance transitions to become a TECHNOLOGY PLATFORM COMPANY, we see our biggest growth opportunity in creating a hybrid, online-to-offline NEW COMMERCE PLATFORM.”  The grand strategy of connecting and synergizing the Reliance retail – Physical marketplace with digital platform of Jio for suppliers, merchants, distributors and consumers is going to be a massive growth booster for RIL. Company is going to leverage existing network of Reliance retail and its’ 35 crore customers base (this no. is stated in the speech) and add to this 21.5 crore Jio customers and target of achieving 5 crore through Giga fiber project – and now imagine if RIL can tap even fraction of this total number on its’ new commerce platform- what will be the scenario.  After Flipkart & then Amazon’s disruption in e-retail space in India, I believe this new commerce platform initiative of RIL is going to bring new wave of disruption.

 Golden decade of RIL ?:  When Mr. Ambani stated in 41^st AGM that “This has enabled Reliance to strategically reinvent itself as a Technology Platform Company”, it was crystal clear where the giant is heading. On the day of AGM (5^th July), RIL stock price closed negative. The initial fear behind this could be that investors couldn’t grasp & process properly the range of new initiatives announced & its’ impact on company’s valuation OR possibly investors are looking at start of new cycle of capital expenditure for these initiatives and so pushed down the stock. But since 6^th-July till 12^th-July RIL stock has moved up by around 12 %, so investors & analysts are still trying to grapple with the announcements’ impact on future valuation of RIL. If RIL manages to pull this off, then this is going to unlock huge value creation for investors, looking from long term – next one decade perspective. Generally, investors try to focus on ‘core competency’ of the firm as one of the many criteria for long term investment but for RIL core competency looks like their ability to predict the future and capability to implement it.

Ending Note: 

RIL is excellent at only two things;

First – Dreaming of monstrously over ambitious projects/initiatives

and

Second – Impeccable execution abilities in achieving the first - in record time.

In terms of above two qualities of RIL and the game RIL is going to play, it can be easily seen as a package of Google of India (for sheer data & content it will be handling) and Amazon of India. (Providing commerce platform & online to offline platform for merchants, farmers, manufacturers, customers and what not!)