He may hold the winning ticket in tech and Silicon Valley knows it

By Rishi Iyengar | CNN Business

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 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 and Intel came next, before
Google
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.

Jio has become the gateway to India’s internet, and Ambani
holds the keys.

“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, told CNN Business. “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 and Walmart’s 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 and
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, 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 told CNN Business
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 told CNN Business. “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.”

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Source: FS – All – Interesting – News 2
He may hold the winning ticket in tech and Silicon Valley
knows it