Tech tycoons circle India’s untapped digital market

From his 27 storey family home Antilia overlooking south Mumbai, Mukesh Ambani enjoys spectacular views of the Arabian Sea, the lush green mountains of the Western Ghats – and teeming Dharavi, India’s largest slum.

Cooped up in isolation, Mr Ambani – who with an estimated net worth of $57bn (£45bn) is Asia’s richest man – has plenty to keep him occupied.

Antilia has a 168-car garage, a ballroom, 80-seat theatre, terrace gardens, spa and a private Hindu temple.

But the 63-year-old chairman of India’s Reliance Industries has not been at a loose end. In a flurry of deals achieved during lockdown, Mukesh Ambani has raised $13bn with eight investments. In seven weeks, he has given away a 21pc stake in Reliance’s new telecoms business Jio Platforms, which just four years after its creation is now valued at $65bn.

Even for a consummate dealmaker like Ambani – whose father Dhirubhai built Reliance from scratch into a colossus spanning oil to textiles, retail and telecoms – it has been quite a feat.

Amid market turmoil, Mukesh has reeled in blue chip names including Facebook – which paid $5.7bn for a 9.9pc chunk of Jio, US private equity giants KKR, General Atlantic and Silver Lake. Middle Eastern sovereign funds including Mubadala and Abu Dhabi Investment Authority have also pumped billions into the venture, which with 400m subscribers is the launch pad for an ambitious e-commerce and digital services business.

But Mr Ambani is not the only Indian telecoms tycoon who has been raising big bucks overseas recently.

As India emerges as a key global battleground for Silicon Valley, Amazon is rumoured to be in talks with Sunil Bharti Mittal, the billionaire founder of Airtel, a rival telecoms business. Google, led by Indian-born Sundar Pichai, is reportedly in talks with Vodafone Idea, the UK firm’s Indian joint venture.

Microsoft, run by Hyderabad-born Satya Nadella, is also thought to be in the mix alongside Saudi Arabia’s sovereign Public Investment Fund. Neither has yet finalised terms with anyone.

For Andrew Holland, founder of Avendus, a Mumbai hedge fund, the appeal for foreign investors is obvious.

With 1.37 billion people and rising, India is set to exceed China as the world’s most populous country by 2027 – with hundreds of millions of people who are yet to own a smartphone. Although e-commerce in India is booming, it remains years behind the West so the potential for growth is huge.

“They are shut out of China so what more could you ask for? India is willing to let them in. Where are you going to get sustainable growth? Indian telecoms and retail.”

Dinkar Ayilavarapu, a partner at Bain & Co in Delhi, says: “India is the last remaining scale market from an internet standpoint for the foreseeable future. If you are a large digital player in the West, China is all but out of bounds but in India, the cement has not yet set fully. It is a growing and attractive marketplace. Out of the next billion internet users, the majority will be in India. The size of the market and the opportunities are so chunky, you are better off acting now.”

Rupen Jhaveri of KKR who led a $1.5bn investment in Jio, says: “We are not viewing this as investment in a telecom company, it is much more than that. The exciting part is their digital and tech capabilities.”

Having already built a successful mobile and internet business and seen off the competition, Jio now plans to use the cash, technology and know-how of its “strategic partners” to build an e-commerce and payments business loosely modelled on China’s WeChat, a multi-purpose messaging and payment app with 1.2 billion users.

Facebook, the owner of WhatsApp, which is wildly popular in India, will play a critical role. “Jio has already invested a lot of money in its digital segment, and their ability to bundle all of this onto MyJio app – one of the most frequently downloaded in India – is what sets them apart,” says Jhaveri.

Either way, India’s ruthlessly competitive telecoms business is not for the faint-hearted.

Awash with corruption scandals and shifting tax and regulatory regimes, foreign investors who have gone it alone have struggled. Most align with a local partner.

Mukesh Ambani’s push into telecoms with the launch of Jio in 2016 was extraordinarily ambitious – and part of a drive to diversify the Reliance conglomerate, India’s largest company, away from a focus on petrochemicals toward broadband, e-commerce, online entertainment and payments.

Reliance has poured more than $37bn into the project, in which Mukesh’s son Akash, 29, a keen Arsenal fan and a collector of supercars, has played a key role.

By competing aggressively on price, within months Jio had crushed rivals including Mukesh’s own younger brother Anil Ambani.

His telecom business Reliance Communications toppled into bankruptcy in 2019. Around the same time, Britain’s Vodafone was forced into a merger of its Indian unit with rival Idea Cellular. Others quit the market or were acquired, leaving Jio, Airtel and Vodafone Idea as the only credible players left.

The dramatic fall in the cost of data is turbocharging India’s digital economy. Rohit Dubey, head of corporate communications at Reliance Jio, said: “People have started using data but apps and services that were previously only available to a small set of the population, are now available to a larger cross-section. One of the reasons other companies like Netflix are doing well here is because Jio has brought down the cost of data.”

“Smartphone and data penetration have gone up considerably because of Jio,” says Rohan Dhamija, director of South Asia, Analysys Mason. “For tech investors, India is the last large frontier for them. Whether it is Facebook or Google, all of them got locked out of China.”

India represents both a growth opportunity and the chance to push their software and services among Indian consumers.

After years of growth, Jio now poses a threat to Amazon’s ambitions in India, which it considers a key growth market. With Jio the dominant player in India’ smartphone business and eager to push its own e-commerce business, Amazon is hunting for ways to reach Indian consumers with services like its Alexa voice assistant and Amazon Prime Video.

That may explain the US giant’s reported talks about taking a $2bn stake in Airtel, which has 300 million subscribers of its own. With some of the world’s wealthiest men – Jeff Bezos and Mukesh Ambani and Mark Zuckerberg – squaring off, it’s likely to be a tough fight.

Either way, for Mukesh Ambani, Jio was a bold bet which is paying off. Reliance shares have gained more than 80pc since late March.

“The growth of Jio has just been remarkable,” says Andrew Holland of Avendus. “The idea was they would keep prices very low until they got rid of the competition and could then raise them. That means the margins are going to rise. There is a lot of good news to come.”