Ambani’s Reliance Jio Under Pressure to Deliver His Multi-billion Dollar Vision Amidst Regulatory Battle in India

Ambani’s Reliance Jio Under Pressure to Deliver His  Multi-billion Dollar Vision Amidst Regulatory Battle in India

Amidst the  pressure from international investors and regulatory battle in India, Reliance Jio announced it’s making all off-net domestic voice calls free, from January 1 2021. Indian Telecom Regulatory Authority (TRAI) had a plan to implement a Bill and Keep regime that would end interconnect usage charges (IUC) for all domestic calls.

The Indian behemoth said following the TRAI directive, it will make all off-net domestic calls voice calls free, as a gesture of its commitment to revert off-net domestic voice call charges to zero, as soon as the IUC is abolished.

It was a tactic used by the Mukesh Ambani-owned telecom company even before the directive of TRAI, that helped it to conquer India’s telecom industry with over 400 million subscribers.

“For context, in September 2019, when TRAI extended the timeline for implementation of the Bill & keep regime beyond January 1, 2020, Jio started charging its customers for off-net voice calls, at a rate exactly equivalent to the applicable IUC charge,” Times News noted in a report.

Jio had assured its subscribers that the charges will end as soon as the TRAI directive to abolish the IUC is implemented, a promise it has kept by making the free-call announcement.

“Today, Jio has delivered on that promise and made off-net voice calls free again,” the statement said.

The news impacted Jio’s competitor, Bharti Airtel negatively. Times News reported that its shares slumped 2% in intra-day trades on December 31 after Jio made the announcement.

Bharti Airtel scrip was last seen trading around Rs 508.95, down by Rs 7.70 or 1.5% at 1504 hours on National Stock Exchange (NSE).

Meanwhile, India’s market watchdog handed Reliance Industries 250 million rupees ($3.42 million) and Ambani 150 million rupees for fraudulent trade practices they engaged it while selling a stake in a subsidiary in 2007.

The Securities and Exchange Board of India (SEBI) accused the behemoth of taking derivative short positions in shares of separately listed Reliance Petroleum back in 2007 through third parties before it sold a 5% stake in the business.

SEBI’s decision came with consequences. Reliance was asked to surrender about 4.5 billion rupees plus 12% annual interest for what the regulator said were unlawful gains from that deal. Reliance and some third parties were also barred from trading in derivatives for one year.

Reliance has denied any wrongdoing, saying the trades examined by SEBI during that time were “genuine and bona fide transactions” and that the regulator had “misconstrued the true nature of the transactions and imposed unjustifiable sanctions.”

The group is waiting for a Supreme Court appeal hearing against the 2017 ruling that imposed the penalty.

This is coming at a time when Ambani is under intense pressure to deliver a multi billion dollars investment pledge. The 63-year-old convinced Facebook, Google and other Wall Street big names to buy into his vision of digital transformation in India.

His vision is to be developed through many sectors, as he was working to transform the Jio group into a modern business conglomerate that will represent the digital vision he pitched and supports Prime Minister Narenda Modi’s digital transformation agenda.

Ambani received a $27 billion in investment fund from US tech investors and now he is under their radar to deliver.

Jio founder

The focus has been on 5G development that he plans to roll out early this year. But other lines of investment were also incorporated into his vision that got the blessings of Silicon and Wall Street’s big names.

According to Bloomberg, these include incorporating Facebook’s WhatsApp payments service into Reliance’s digital platform; integrating the company’s e-commerce offerings with a network of physical mom-and-pop shops across the country; selling a stake in Reliance’s oil and petrochemical units, a deal he had originally hoped would reduce debt and finance his high-tech pivot earlier this year.

Ambani’s top agenda was ridding Reliance of its $22 billion debt that he set 18-months deadline for himself. The deadline was beaten in nine months, spiking the company’s shares. But that was just part of the problems; investors are keenly watching his every move to see how he transforms $168 billion Reliance amidst COVID-19 chaos and fierce competition from Amazon and Walmart.

While the focus has been on 5G roll out, Ambani is hoping that Reliance could cash in on other subsidiaries to deliver the dream. There was a plan to saturate India with $54 Android smartphones backed by Google, which he plans to execute leveraging Reliance’s dominance in India’s telecom sector. Ambani believes the cheap phones will help Indians to embrace the digital life he is about to introduce to them.

And then there is WhatsApp Pay, backed by Facebook, which offers an opportunity of growth to Reliance’s e-commerce venture.

“Reliance views the integration with WhatsApp’s recently approved payments system as a crucial step in the development of its online shopping services,” said the people familiar with the matter.

The company plans to harvest millions of Facebook, Instagram and WhatsApp users for its e-commerce platforms. One more area that Ambani is looking at is streaming.

According to a plan unveiled by Ambani and his eldest children Isha and Akash at the end of Reliance annual shareholder meeting in July, the new tech services to be integrated into their business empire early this year include streaming platform that will bring Netflix, Disney+ Hotstar, Amazon Prime Video and dozens of TV channels under one umbrella.

However promising the plans seem, Reliance’s reputation hangs on actualizing them and so is Ambani’s relationship with those sold his dream to.

“Reliance shares rose as much as 55% this year to an all-time high in September, but they’ve since pared gains as stakeholders look for more evidence that Ambani can execute,” Bloomberg noted.

With the stakes so high, the scuffle between SEBI and Reliance is something Reliance doesn’t really need.

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