The global 5G market has a new contender: Reliance Platforms. Its entry has dramatically altered the dynamics of a fiercely contested market which has been dominated by multinational giants like Ericsson, Nokia, Qualcomm and China’s infamous Huawei and ZTE. With Jio 5G, Reliance has arrived on the big stage.
At Reliance Industries Limited’s (RIL) 45th Annual General Meeting on 15th July, the 63 year-old business mogul declared that Reliance Jio had designed and built India’s first, fully indigenous 5G platform. Outlining the broad contours of an ambitious plan, Ambani said that Reliance Jio aimed to leverage domestic demand to build and proof a 5G solution and later sell it to other operators.
This would transform the company from a mobile operator into a telecom manufacturer as well, the first company to do so worldwide. Presently, mobile phone companies depend on telecom multinationals like Nokia, ZTE, Ericsson and Huawei for network hardware and cell tower equipment.
Ambani also said that his company was ready to participate in 5G trials alongside international competitors as and when the government gave the go-ahead. This is Ambani’s second big announcement in less than a month. A few weeks ago, he declared that Reliance would develop a local alternative to popular video conferencing app, Zoom.
Stars aligning for Reliance Jio
As India’s largest telecom operator, Jio’s entry into the 5G market was a given. Ambani even told visiting US President Trump in February that Jio would soon launch a 5G network that was completely free of Chinese components. No one could have guessed what was on his mind back then. However, the Reliance Chairman sounded quite confident in his ability to deliver on his word.
There are two reasons. Firstly, Ambani knows full well that high-speed connectivity is the future. Secondly, he has been on an acquisition spree to quickly fill the gaps in Jio’s tech capabilities. In 2018, Ambani picked up a stake in Radisys, a firm specialising in wireless networks which has 60 patents to its name; invaluable for Reliance as it sprints towards the 5G market.
The ongoing India-China spat brought Reliance Jio all the time it needed to continue work on the 5G project. Reliance Jio filed for 68 patents in FY 2018-19 alone, according to research firm, Cogenesis.
The company has been working rapidly to setup underground fibre optic cable networks which will also be used for delivering 5G services. To keep fixed costs down, Jio’s existing 4G LTE network was built around a “converged, all-IP network architecture” which can be easily upgraded to 5G, a fact that was amply highlighted in Ambani’s speech to shareholders at the AGM.
The company planned to utilize this digital backbone to “create compelling solutions across multiple industry verticals like media, financial services, new commerce, education, healthcare, agriculture, smart cities, smart manufacturing & smart mobility.”
Qualcomm Inc. which recently bought a 0.15 per cent share in Jio for INR 730 crore is another partner whose vast domain expertise in wireless technology Ambani will surely be counting on. Qualcomm can help Jio build, scale and commercialize 5G in India. “Qualcomm offers deep technology know-how and insights,” Ambani said, commenting on the partnership. “These will help us deliver on our 5G vision, and the digital transformation of India for both people and enterprises.”
Putting global competitors on notice
Reliance Jio’s foray into 5G is likely to be keenly watched by global telecom equipment makers like Nokia, Ericsson and most notably, Huawei. The Chinese company is fast turning into an outcast in most markets as murky details about its involvement in spying activities on behalf of the Chinese government come to light. Huawei has denied any wrongdoing; yet few are willing to credit their assertions. The Indian government has made up its mind to exclude Huawei from the upcoming 5G trials in all but name.
The date is yet to be announced, however, with the recent crackdown on investments from ‘countries that share a land border with India’ not much is left to the imagination as to who it is meant for.
The fact remains, however, that 5G technology is very expensive and only a handful of companies like Huawei have the capability to build an end-to-end ecosystem – from handset to network infrastructure. Though Huawei has received generous support from the Chinese government, it has arguably the most cost-effective 5G solution anywhere in the world. Its technology is up to 20-30% cheaper than its closest Western competitor.
Cost is also likely to be a huge consideration for Jio, not only on account of infrastructure development, but also spectrum. However, Ambani can afford to outspend other telecom companies, at least in the Indian market. With a raft of investments from top global companies like Facebook and Mubadala, Jio is well on its way to becoming debt free.
Jio boasts a subscriber base of 300 million 4G consumers across India, who will likely be offered attractive plans with 4G backup until all technical issues are ironed out. While Huawei may be able to leverage economies of scale, it will have to incur additional costs related to local data centres that the Indian government is likely to insist on.
As far as scalability is concerned, Jio’s existing nationwide network is proof of its ability to deploy on a large scale. Service quality is an unknown at this point; but Jio will likely have a plan in place to mitigate against any problems that arise. Though competition from global companies is likely to be tough, Jio will have the home advantage.