Mukesh Ambani, chairman of Reliance Industries Ltd. Photo: AFP
Mukesh Ambani, the chairman of India's Reliance Industries. Photo: AFP

India’s richest man Mukesh Ambani’s move to deleverage his business at the Reliance group of companies is attracting big-ticket investors.

Shortly after Saudi Aramco expressed an interest in picking up a 25% stake in its oil refining and petrochemicals business, Japan’s SoftBank is now looking at investing US$2-3 billion in its telecom unit Reliance Jio Infocomm.

SoftBank is reportedly conducting due diligence for its investment through the SoftBank Vision Fund. It remains to be seen how much money SoftBank wants to spend and it is unclear whether the implied equity valuation is only for Reliance Jio or includes e-commerce ventures, Business Standard reports.

The retail and telecom arms together contributed about 25% of Reliance Industries Limited’s (RIL) 2018-19 revenue.

Reliance Jio, which started its services in September 2016, has caused widespread disruption in the Indian telecommunications sector. It offered fourth-generation, or 4G, technology-based services bundled with lots of freebies and attractive offers to woo subscribers.

This led to huge pressure on the margins of existing players and some like Tata Teleservices had to wind up their operations, while others like Vodafone and Idea Cellular decided to merge to take on the stiff competition.

Within a span of two years, Reliance Jio has become India’s third-largest telecom company with the highest monthly subscriber additions.

However, recently Reliance Jio’s average revenue per user (ARPU) has seen a drop, although it still outperforms its rivals. From 154 rupees in the December 2017 quarter, Reliance Jio’s ARPU fell to 130 rupees in the same quarter in 2018 and to 126.2 rupees in the March 2019 quarter. ARPU is the total revenue of the operator divided by the number of users or connections on its network.

In comparison, Bharti Airtel’s ARPU improved to 104 rupees in the December 2018 quarter from 100 rupees in the preceding quarter. Similarly, Vodafone Idea’s ARPU rose marginally to 89 rupees in the December quarter from 88 rupees in the September 2018 quarter.

SoftBank has a mobile telecom business in Japan and also owns Sprint in the US. It also has a 30% stake in Chinese e-commerce giant Alibaba.

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