Will India’s Jio be the next tech giant?

Mammoth technology companies tend to blossom slowly. Google grew quietly out of a garage, Facebook from a dorm room, Amazon in a car rolling across the country. The investments in such upstarts amount to grubstakes, relatively paltry sums from risk-seeking investors who know it could all come to naught. 

Yet when two of these giants (Facebook and Google) plunk down billions of dollars to back an emerging competitor to the third (Amazon), a new tech colossus can be crowned nearly instantaneously. That company, Jio Platforms, is a four-year-old mobile phone company controlled by India’s richest man, Mukesh Ambani. It has attracted so much capital so quickly that while the rest of the world is focused on a global pandemic, Jio suddenly has staked its claim to becoming the first global tech giant to get its start in India. 

The scramble began when Facebook inked a $5.7 billion deal with Jio in April for a 9.9% stake in the company. That ignited a cascade of investors grabbing a slice of Jio, which is controlled by Ambani’s family business, the petrochemical conglomerate Reliance Industries. In May, U.S. private equity heavyweights Silver Lake, Vista Equity Partners, General Atlantic, and KKR together plowed nearly $5 billion into Jio. In June, Jio collected more than $4 billion from other U.S. tech investors and sovereign wealth funds in Saudi Arabia and the United Arab Emirates. And in July, after selling slices of Jio to U.S. chipmakers Intel and Qualcomm, Jio sealed a $4.5 billion deal with Google for 7.7% of the company. For good measure, Reliance, which funded Jio from its own balance sheet, raised nearly $7 billion more in a rights offering.

By mid-July, Jio had amassed more than $20 billion, leaving Reliance and Jio net debt-free and positioning the mobile offshoot for an eventual IPO. What’s more, by spinning up Jio as a high-growth offshoot of an old-line energy company, Ambani has solidified his place as one of the world’s top business titans. Already Asia’s richest man—his 27-story Mumbai mansion has a 168-car garage; nine elevators; and a room with artificial snow, a handy feature in the tropical heat—Ambani now is one of the five richest people on the planet. If his ambitions for Jio succeed, it will join the ranks of global e-commerce “superapps” of the magnitude of China’s Alibaba and Tencent. 

To do that, Jio and its many new non-Indian partners will wage an all-out battle with two American behemoths that have invested heavily in Indian retail: Walmart and Amazon. The prize is nothing short of a market that, by all rights, should be among the top tier in international commerce—but which until now has frustrated many of those who have tried to capitalize on it. “India is no longer a regional player,” says Mathew Oommen, the Indian-born president of Jio Platforms and a former U.S. telecom executive. That is why, he says, investors rushed in. Despite its youth, Jio is now in a position to pick and choose among its eager suitors. Oommen says Jio’s top criterion has been partners who appear to have India’s interests at heart. “You would be surprised, the number of investors we have turned down,” he says.

Jio’s extraordinary season of fundraising might never have happened had it not been for a persistent complaint by Ambani’s teenage twins that will sound familiar to any parent: The Internet was too slow to adequately run the sites other kids were consuming every day. Ambani had inherited Reliance from his father, and he expanded the Mumbai-based oil-refining and petrochemical outfit into supermarkets, gas stations, and thousands of convenience stores. Reliance has shopped for assets abroad as well, more recently buying the British toy retailer Hamleys. Already immensely rich by the 2000s, Ambani, now 63, lacked one crucial segment in his portfolio: telecommunications. That was all too clear to his daughter, Isha, and son Akash as they struggled (albeit in the lap of luxury) with India’s creaky 2G networks. “Growing up, they expressed to many people, and to their dad, their frustration not being able to use mobile data,” says Oommen, the Jio president. “Isha had a large influence on her dad, persuading him that this was a big opportunity.”

Few realized just how big. Won over (or worn down) by his children, Ambani purchased a failing phone company in 2010, giving him licenses over some of India’s wireless spectrum. At the time, hundreds of millions of Indians had never used a mobile phone, let alone logged on to the Internet. Ambani plowed about $35 billion into laying fiber lines and erecting about 200,000 towers for a modern 4G network in every corner of the vast country. The new company’s catchy name, Jio, looks a bit like “oil” spelled backward. It was a fitting inside joke. Fossil fuels had made Ambani rich. Now, he concluded, he could future-proof his wealth by pegging it to data. 

Jio’s trajectory has been jaw-dropping. When it launched in September 2016, only about 28 million Indians owned smartphones, out of a population of more than 1.3 billion. Within 18 months Jio had signed 100 million people to its network, and by the end of July had nearly 400 million subscribers. The newcomer’s trick was cheap data. Before Jio, mobile data cost $4.50 per gigabyte, painful in a country with per capita annual income at the time of $5,760. Jio offered a gigabyte for just 15¢ and made voice calls free. This unleashed a price war that entrenched operators like Vodafone and Bharti Airtel were destined to lose. 

Two years after offering free calls and inexpensive data, Jio unveiled a $20 Android handset called the Jio Phone, loading it up with Google-owned apps like YouTube, included free with mobile plans. With that one product, Indians began to consume as much data as all of the Americas combined. It was a boon not only for Indians but for global tech giants too. Facebook’s WhatsApp now operates in all 23 official Indian languages and has 400 million users, making India WhatsApp’s biggest market. And in a country with widespread illiteracy, Google’s YouTube acts as the default search engine for many. To other emerging countries with high-priced Internet, India now offers a prime example of the accelerator effect cheap data can have on businesses, education, and rural development. “Broadband connections have skyrocketed,” says Nikhil Pahwa, founder and editor of the Indian tech analysis site MediaNama. Ambani, he says, is “someone who dreams big.”

Ambani’s dreams are far bigger even than telecommunications. Jio has rapidly displaced its cell phone competition, but it still has little presence in huge swaths of the Internet, including mobile payments and e-commerce. Says Oommen: “What we’re seeing is only a small piece of the larger, bigger opportunity.”

To grab those opportunities, Jio needed global partners, which created a virtuous investment circle. The investors got a stake in a fast-growing company that generated cash on its core business. Reliance was able to wipe clean its balance sheet ahead of its stated timetable. And Jio gains the globe’s savviest tech players as allies. “Ambani made a huge bet on Jio,” says Egon Durban, co-CEO of technology investment firm Silver Lake, who led the firm’s Jio investment. Jio, he says, “is the world’s greatest private tech company hidden in plain sight.”

Driving away from the sprawling megalopolis of Mumbai, across the bridge spanning the Arabian Sea, you reach the quieter exurb of Navi Mumbai and eventually arrive at the leafy, cordoned-off, 550-acre campus that is headquarters to Reliance Industries. Set around the complex of office buildings, both old and new, are neat footpaths connecting tennis courts, soccer fields, and a cricket pitch, as well as basketball, volleyball, and badminton courts and a full-service gym. At the center of this idyll sits Jio, whose building has blue-tinted glass walls shielding the interior from the blistering sun, with soothing shadows across its sleek offices.

Nearby sits the Jio Experience center, a building spotlighted in soft pinks and purples that represents the company’s vision for its future. It imagines Jio not as a mobile phone carrier but a “digital lifestyle company,” as a staff member puts it, a business embedded in Indians’ daily habits. The whizbang toys on display include Jio TVs streaming, among other offerings, Bollywood hits and cricket matches—addictive Indian pastimes—via voice commands into a set-top box. “Our story has been about digital services as a platform from the beginning,” says Oommen, who was chief technology officer of U.S. mobile operator Sprint before returning home to join Reliance in 2011. “It has never been an afterthought.” 

Perhaps not. But by earlier this year, Jio was still not offering its gargantuan number of mobile users an array of other paying services. And it trailed badly behind competitors in the “digital lifestyle” offerings it had envisioned. Amazon began spending billions in India in 2012. And even as Jio was giving away its handsets, Walmart muscled into India in 2018, buying control of the homegrown online-shopping company Flipkart for $16 billion.

To continue growing while beefing up its offerings, Jio began to look outward, which had the added benefit of cleaning up its balance sheet. The outsiders were eager for a way into the Indian market with a partner who knew how to operate there. Facebook’s investment in Jio was India’s single biggest foreign tech investment ever and Facebook’s biggest investment since buying WhatsApp in 2014 for $14 billion. One big draw was Jio’s ability to maneuver through India’s labyrinth of government regulations—something that has entangled Amazon. In January, one day before Bezos flew to New Delhi to invest $1 billion more into Amazon India, the government announced the company was under investigation, along with Walmart-controlled Flipkart, for antitrust violations. Jio, adept at working the halls of power in New Delhi, has faced few such problems. “They’ve shown evidence they can execute well on initiatives that solve for both scale and complexity, which is hard to do well in any country,” says Ajit Mohan, Facebook’s top executive in India.

Ambani and Zuckerberg cast their partnership almost as a patriotic act, saying it would be crucial to protecting the millions of small mom-and-shop shops, called “kirana stores,” that for decades have been the backbone of Indian commerce, and whose future has looked increasingly precarious as online shopping takes off. In a YouTube address from his mansion, Ambani said he and Zuckerberg shared the goal of “serving all Indians,” saying that WhatsApp had built an “intimate relationship with Indians,” and whose partnership aligned with Prime Minister Narendra Modi’s digital strategy for the country.

Under the deal, Jio’s e-commerce site, JioMart, which launched in June, will be linked to WhatsApp, which will include an online payment option for the first time. The idea is that the payments will be for orders from 40 million or so kirana stores, which would deliver a far wider range of goods by combining their catalogs and delivery. Amazon and Walmart constitute a mortal threat to these family-owned shops, putting Jio in the role of a nationalist savior. “The big traditional e-commerce players are eradicating them,” Oommen says. He sees the quintessential JioMart-WhatsApp customer as his mother, 84, who lives in India’s southern state of Kerala. “My mom is not the most proficient with online things,” he says. “But she knows the guy down the street who delivers most of her items.”

Facebook will also be able to use its Jio deal as a prototype for its global market. In the same way, Google first rolled out its online payment system in India, before expanding the app into the U.S. and elsewhere. Google says it is now working on a low-cost Android operating system for Jio phones, which positions it yet again to test prototypes in India for use elsewhere in the world. In statements after his April deal, Zuckerberg made it clear Facebook has similar designs. 

Ambani made a huge bet on Jio. Now it is the world’s greatest private tech company hidden in plain sight.

Egon Durban, co-CEO, Silver Lake

It is Jio’s prospect for huge revenue growth that has ignited the frenzied dealmaking, as investors, almost all American, raced to buy slivers of the company while they could. “Companies are coming to the realization that India is a unique market,” says Diego Piacentini, a former Amazon executive who oversaw the company’s multibillion-dollar move into India. Piacentini now is an adviser to KKR, though he wasn’t involved with the private equity firm’s Jio investment. For investors, he says, “the approach is, ‘better be sorry I made the wrong investment, than I missed a huge opportunity.’ ”

In fact, the potential to launch its e-commerce business with Facebook was, for Jio, a game changer. “Reliance may be able to disrupt India’s e-commerce space the way it did within the telecom sector,” Pranav Bhavsar, India consumer analyst for ASA Capital, told an Indian journalist. Western investors, he says, are “buying into the promise of changing India’s retail landscape.”

While Jio has proved adept at building a subscriber base, its success in offering new services is not entirely assured. Under the pandemic, Jio began testing its fiber services in 50,000 homes, for example. But on several fronts, the company is racing to catch up with the Western competition. Walmart and Amazon already each have many millions of customers in India. And Google, Jio’s newest investor, launched its online payment system in India in September 2017. “Google Pay has a significant head start over Facebook in terms of online payments,” MediaNama’s Pahwa says. “I doubt they will be able to compete.”

There are other issues, too, which could lead Zuckerberg to question his $5.7 billion investment at times. Not the least of those issues is the sheer complexity of operating in a country with multiple languages and religions, whose government regulations still heavily favor local businesses. When I ask Piacentini, the former Amazon executive, what challenges Western tech investors face in the country, he replies, “How many hours do you have?” He cites as one example trade regulations among India’s 28 states, which make online commerce convoluted. “In India you make investments for the long term. That means 30 years, not five years,” he says. “You need a lot of capital and great people. Execution is incredibly hard.”

For all that, there could be huge prospects ahead, which Reliance is already eyeing. Just as the WhatsApp payments system is likely to expand quickly to Facebook’s markets in the rest of the world, so too might Jio ultimately use its home country as a place to build a platform of services that it could then replicate in other countries. That would catapult Jio, and by extension, Reliance, into the ranks of global companies. Jio president Oommen says he believes even parts of the U.S. and Europe might be potential markets for Jio. “We will not rule out going global at the right time,” he says. Market watchers expect a Jio IPO in the not so distant future, although Oommen says the company has “not officially deliberated a timeline” for going public. But he says, “It is a possibility.”

In classic Jio style, those plans could unfold quickly and on a huge scale—potentially making Jio the world’s next big tech giant, and India’s first. In July, Ambani told shareholders Jio is set to roll out its own 5G technology next year in India, and also expand into big data, machine learning, blockchain, and health care platforms. All of them, he says, would be readily exportable to markets across the world. “Each of these solutions, once proven in India, has the potential to be a global solution,” Ambani said. His U.S. investors will be along for the ride.

Vying for the Indian market

Western players have now lined up either with or against Jio Platforms. The three big tech and software companies are partners; America’s two biggest retailers are foes.

Facebook
CEO Mark Zuckerberg led the Western parade of investments in Jio Platforms with a $5.7 billion stake in April. Facebook’s WhatsApp is huge in India and has a higher-income clientele than Jio’s users.

Google
Sundar Pichai, CEO of Google and its parent company, Alphabet, appeared by video at the Reliance annual meeting in July to unveil a $4.5 billion investment in Jio. Google has focused intently on India for its untapped market and sees Jio as a way to navigate treacherous governmental waters.

Microsoft
Jio has partnered with the software giant through the project that is CEO Satya Nadella’s crowning achievement, Microsoft’s cloud-computing Azure business. The two companies have formed a joint venture to sell cloud services in India.

Amazon
Jeff Bezos, the boss of Amazon, has invested billions to make India a winning market for the Seattle-based e-commerce giant. JioMart and its tie-up with WhatsApp constitute a threat to Amazon.

Walmart
CEO Doug McMillon bet big on India, buying a controlling stake in e-commerce champion Flipkart. Walmart has been stymied by regulations that favor local retailers.

A version of this article appears in the August/September 2020 issue of Fortune with the headline “Can Jio be the next tech giant?”

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