Aditya Hore
Ahmedabad: In February, Reliance Industries Chairman and Managing Director Mukesh Ambani was reported to have told US President Donald Trump in a CEOs’ Roundtable that “We’re the only network in the world which doesn’t have a single Chinese component.”
This sums up the recent hectic investments in Reliance Jio, which is keen to rollout the 5-G network in India at the earliest, without anything Chinese, at a time when Trump and many others are going hammer and tongs against Beijing for its ‘failure’ to warn the world in time about the unfolding COVID-19 global pandemic.
In the space of three weeks, Reliance Jio has collected more than Rs.60,000 crore by way of investments from three global majors, including Facebook. Now it is likely to go in for a rights issue as well, in what is seen as its attempt to get enough money for a 5-G rollout as well as retiring 75 percent of its debt by 2021. The
company would need around Rs.50,000 crore for a 5-G rollout.
To this end, the company has been wooing investors. First, there were talks of state-owned oil producer Saudi Aramco buying stake in Reliance Industries. But the company’s IPO did not live up to the hype what with plummeting demand and oil prices and global recession due to coronavirus. It was expected to raise between $20 billion and $40 billion at a valuation of $2 trillion. But the company’s valuation plummeted to $1.6 trillion. So, the RIL-Aramco deal is likely to stay on the backburner for now.
However, Facebook offered Reliance Jio a whopping $5.7 billion in cash — part of which was soon channelled to reduce the debt. More investments came but the company needs more money.
So now Reliance is turning back to existing investors — people who own parts of RIL to step in. RIL is contemplating a Rights Issue.
The company will issue 41 crore new shares at a 14 percent discount on prevailing market price in the open market as on April 30. But rights will be available to only Reliance shareholders. They will get the right to buy one new share for every 15 shares they hold, at a discounted price of Rs.1,257 per share. RIL plans to raise nearly Rs. 53,125 crore by rights issue. A buyer can also sell the rights to those willing to buy and make a bargain.
4-G to 5-G
For its $46 billion 4-G network, Reliance chiefly relied on one vendor—Samsung. For 5-G, it is going all out for open source. It plans to go for not just building a 5-G network on its own terms—free from vendor lock-ins—but also for selling to the rest of the world. Already, COVID-19 afflicted Britain has ruled out buying 5-G technology from Huawei of China. Reliance may find an opening in London for rolling out the 5-G network in the West.
On the vendors’ issue, Tariq Amen, CTO of Japan’s newest mobile operator Rakuten, who headed Jio’s networks team until 2018, had set the ball rolling. Under him, Jio acquired US software company Radisys and invested in a few other start-ups. It hired over 150 IIT graduates, built networking equipment, and ran prototypes in Jio’s campus.
Coincidently, the same year Jio began its equipment push. TRAI, India’s telecom regulator, came up with a set of recommendations on ‘promoting local telecom manufacturing’ as part of the ‘Make in India’ campaign. It added a new category—Design in India, Manufacture Abroad. This would mean that Jio’s plans would still qualify for incentives under the Make in India scheme.