India’s newest telecom major Jio now has secured more than 70 million users within four months, thanks to its free voice and data plans. It has, however, been suffering from a lack of network coverage, extensive call drops, and sluggish internet speeds. Thus, the Mukesh Ambani-led venture is now planning to invest another humongous sum to further its expansion and competition.
In an RIL board meeting on Friday, the members have decided to pump another Rs. 30,000 crore into its telecom company — Reliance Jio Infocomm. It has decided to sell 600 crore preference shares through a rights issue to raise the said amount. These preference shares will be 9% non-cumulative optionally convertible available at Rs. 50 each, including a premium of Rs. 40.
The company’s board has expanded on this procedure in a statement issued to National Stock Exchange. The amount paid for each optional convertible preference shares (OCPS) can either be redeemed at Rs. 50 or converted to five equity shares at Rs 10. The second option is only applicable at Jio’s discretion and not later than ten years from the date of allotment of these shares.
The fresh capital flooding into Jio’s coffers will be utilized towards the expansion of its network coverage, digital presence, and capacity. The company might have amassed a lot of users — expected to touch 100 million by March end — but it still needs to update its infrastructure to meet their requirements. It should now focus on perfecting its service to retain users who’ve come on onboard during this rat race for free services.
To add to your knowledge, Reliance Industries had already invested a surprisingly monstrous Rs 1.71 lakh crores while setting up its telecom venture from scratch. This capital infusion will now increase the total investment into Jio to a near complete Rs. 2 lakh crore. It will further increase pressure on existing telecom behemoths, Airtel, Idea and Vodafone to better its 4G services.
Ever since its launch in September last year, Jio has been working towards just one goal — market disruption. Being the first next-generation 4G voLTE telecom provider to offer bundled voice+data services to users, there was a massive demand and long queues for getting a SIM in their hands. The company has, thus, signed up a major chunk of the population by offering its services for free – that has now been extended until March 2017.
This hubbub surrounding Jio has also led major telecom giants to not only slash prices but also mull over the decision to merge its business with others. Yes, there have recently been speculation that Vodafone was hunting for a buyer and has approached Idea Cellular to merge their services. But, both have denied a possible merger.
On the other hand, Mukesh Ambani is planning to expedite the reach of his telecom services by launching a Rs. 999 voLTE smartphone. This will lead to an increase in the rate of migration of users away from a feature phone to a smartphone. Thus, he is looking to ensue yet another disruption in the mobile ecosystem as well.
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