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14 July 2020

Qualcomm is the latest strategic investor in Reliance Jio

The latest high profile company to invest in India’s Jio Platforms is Qualcomm. The US chip provider has a track record of taking stakes in operators in order to increase momentum behind some of its key technologies, and the latest example is a $97m investment, through its venture arm – though that will get it only a 0.15% stake.

However, the move is strategic, as it was for Facebook, whose larger investment kicked off a 12-week run of deals for stakes in Jio Platforms – the subsidiary of Reliance Industries (RIL) which controls disruptive MNO Reliance Jio. Although some of the total of $15.7bn raised in these 12 transactions will be used to pay off Jio’s debt, the operator has indicated that some will be invested in accelerating its roll-out of expanded 4G and fiber networks, of digital services and a virtualized core, and eventually of a virtualized 5G RAN.

This is where Qualcomm’s interest will lie, and its motivations will be different from those of Facebook – and certainly not merely financial, like the other new investors, which are mainly venture capital, private equity or sovereign wealth funds. However, another of the recent new investors was Intel Capital, offering up the interesting proposition of two chip vendors vying for influence within an influential customer – though since Intel quit the smartphone market and Qualcomm put its server processors on the back burner, the two could also cooperate these days.

Facebook has gained increased influence over a key supporter of its push for open architectures in the mobile network, since Jio is already a major supporter of the Facebook-initiated Telecom Infra Project (TIP). And the social media giant also gains a channel to increase business for its digital services, especially in the huge small business market in India.

Qualcomm said it will help Jio to “roll out advanced 5G infrastructure and services for Indian customers”. Given that Qualcomm has a near-monopoly of the device side of operator trials in any new generation of technology, most recently 5G, its expertise will be of significant value to Jio as it moves towards 5G.

Steve Mollenkopf, CEO of Qualcomm, said his company believes that Jio Platforms “will deliver a new set of services and experiences to Indian consumers” in the future. “Jio Platforms has led the digital revolution in India through its extensive digital and technological capabilities. As an enabler and investor with a long-standing presence in India, we look forward to playing a role in Jio’s vision to further revolutionize India’s digital economy,” he said in a statement.

The Indian ecosystem could also gain enhanced importance as a counterweight to China amid the current threat of the mobile world splitting into two technology islands, centered around China and the USA. India already has significant software development and handset industries, though its attempts to build a networking equipment business have not progressed very far. But Qualcomm is likely to be keen to be seen to invest in India, to get a preferred position with the country’s device manufacturers, and to encourage the authorities to lower any barriers to outside investment and activity.

Meanwhile, Jio continues to steal market share from its main rivals, Bharti Airtel and market leader Vodafone Idea, to the extent that the latter might even exit the market. Sources told India’s Economic Times that Vodafone Idea has lost around 20m subscribers to its competitors in the past two quarters, and now has a base of 291m, which would mean losing its leadership position to Jio, and being only 7m ahead of Airtel. Some analysts think that, in the current quarter, Vodafone has slipped even further, into third position behind Airtel.

This could put the operator’s position in the country at risk – Vodafone Group has already said it would not invest further money to bail out its Indian subsidiary, after the Indian courts imposed huge adjusted gross revenue (AGR) fees on Idea and Airtel. The telcos are seeking to negotiate a 20-year payment term, but even that might not keep Vodafone in the market if it is losing so much share, speculate analysts.

“The AGR relief is a separate issue and unconnected with the dim business prospects we face. The business is hanging by a thread,” an unnamed telecoms department official told the ET. “Already the competitors are displaying their heft in the marketplace.”

However, as investors flock to Jio, the cloud giants have also been reportedly looking for their own Indian footholds. Google was rumored to be interested in a stake in Vodafone Idea and Microsoft in Airtel – investments which could be a timely boost for the coffers and the confidence.