Analysis: Mukesh Ambani is dialling a new Bharat with Reliance JioPhone

People from the hugely untapped mass of the 50-crore feature phone users can upgrade to smartphone

It is a well-accepted fact that everything Reliance Industries (RIL) does has ‘scale’, but what the recently conducted annual general meeting (AGM) of the company did, has established it as a corporate giant with ‘style’ along with substance.

Right from the town-hall styled full-screen visuals in the backdrop to the peek into the privileged footage of Dhirubhai Ambani’s journey through various milestones, to the dramatic suspense-laden announcement of the pricing of the Jio Phone as a postscript to Mukesh Ambani’s speech — all of it made for a captivating and engaging piece for shareholders and investors across the spectrum.

However, those 100 minutes of the AGM aforementioned have arguably but unequivocally begun the process of changing the economic landscape of our country in years to come. 

What RIL has launched in the form of an affordable Jio Phone handset is not just a great tweak to the business model that the company is likely to follow to make itself profitable, but it could pave the way for changing the lives of millions of Indians in ways that possibly were only part of conjecture on the making of a newer India (Bharat). 

Not only does the Jio Phone carry the potential to set the company’s cash registers ringing but as more people from the hugely untapped mass of the 50-crore feature phone users upgrade to smartphone usage, it is bound to redefine the addressable market for so many other businesses like media, banking & finance, retailing, discretionary consumption and agriculture. It would, therefore, be unfair and half-hearted an approach to just clamour about the impact on other telecom service providers and handset manufacturers.

While it was a feeling of déjà vu from last year’s announcement of the Jio launch and there were expectation that other incumbents like Vodafone, Bharti Airtel and Idea would get plummeted, one needs to realise that the Jio Phone launch is clearly targeted at making the vast sea of 2G user to migrate to 4G. 

Reliance Jio is not necessarily poaching on others’ market share out of the 28-crore ‘smart’ subscribers – this is the key reason why this breakthrough launch is not likely to negatively impact the stock price of listed players like Bharti Airtel and Idea as much as positively impact the RIL stock. 

It is the RIL stock that will benefit largely due to the now-visible cash flows that can dramatically improve the return on equity for the stock as the huge investments of over 200,000-crore start getting better utilisation through the addition of newer subscribers. 

And as it happens when a giant rumbles up from sleep after many years, it is bound to shake up the earth around it a bit. As investors, it may be worth watching this space closely to identify which businesses could walk in step with the reawakened giant and benefit from investing in those. 

The author is a director at Altamount Capital Management. The views expressed are his own.