Those should go some way toward creating the Indian equivalent of Verizon Communications Inc., the largest U.S. wireless carrier. Or at least that's what the stock's 38 percent jump this year in dollar terms is all about.
Over the past 12 months, Reliance's refinery on India's western coast has garnered $11 from each barrel of crude oil, beating the Singapore refining benchmark by an impressive $5 a barrel. With neither domestic gas production nor overseas shale output doing much, Chairman Mukesh Ambani, India's richest man, is betting on his almost-completed investments in refining and petrochemicals to shore up earnings and cash flow.
While a haul of 100 million users over 170 days isn't to be scoffed at, it's thanks to a free trial that only recently turned into a paid-for (though attractively priced) introductory offer. The steady-state average revenue per user is still the big unknown.
With Jio's entry in September, rivals Bharti Airtel Ltd. and Vodafone Group Plc have cut tariffs. A 60 percent slump in fourth-generation, or 4G, data charges has meant that even with traffic surging fivefold in a year, industry revenue growth has been practically flat, according to S&P Global's Indian affiliate, Crisil.
It's hard to know when the dust will settle, though Reliance's assertion that it's "well-positioned" to achieve a share of revenue above 50 percent by 2021, when India's data market will top $46 billion a year, shows Ambani is betting big on a "winner takes all" effect.
Nothing wrong with that. As Crisil researchers say, Verizon's success has demonstrated quite clearly that market leadership is worth bleeding for. For almost a decade, the largest U.S. network has enjoyed a return on capital that's 5 to 10 percentage points higher than its competitors'.
In its first six months of operations, Jio's loss tripled from a year earlier to $3.5 million. That's a rounding error for a conglomerate that earned more than $1.2 billion during the March quarter.
Ambani's 4G bet
That won't be enough to turn Jio into India's Verizon. At least it will be a start.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
(Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.)
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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