How Airtel Or Amazon Could Challenge The Jio-Facebook Partnership

Last evening (4 June), there were several media reports about Amazon eyeing a 5 per cent stake in Bharti Airtel, India’s second-largest telecommunication network with 300 million subscribers, worth at least $2 billion.

While Airtel, with a subscriber base that almost equals the population of the United States, was quick to refute any such developments, Amazon too did not comment on the reports.

Meanwhile, Mukesh Ambani’s Reliance Jio (Jio Platforms) continued on its winning spree. Earlier today (5 June), it was reported that Abu Dhabi state fund Mubadala Investment Company, a sovereign investment firm, will buy a 1.85 per cent stake in Jio Platforms for Rs 9,093.60 crore.

The latest investment follows that of Facebook (9.99 per cent stake for Rs 43,574 crore), Silver Lake Partners (1.15 per cent for Rs 5655.75 crore), Vista Equity Partners (2.32 per cent stake for Rs 11,367 crore), General Atlantic (1.34 per cent for Rs 6598.38 crore), and KKR (2.32 per cent stake at Rs 11,367 crore). Thus, the total stake sold in Jio Platforms now stands around 19 per cent, taking Jio Platforms’ valuation close to $65 billion.

Pursuing the goal of cutting down the debt at Reliance industries, it is being reported that Ambani is also in discussion with Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund for additional investment.

Against Airtel’s 300 million subscribers, Jio, which began operations in September 2016, has more than 387 million subscribers across India.

Less than two weeks ago, Reliance went live with JioMart in 200 cities, an online grocery service, similar to the more established players like BigBasket, Amazon Pantry, and Grofers.

However, unlike the current players in the market, JioMart went beyond the established metro cities of Mumbai, Delhi-NCR, Pune, Bengaluru, etc, and will look to serve many second and third-tier cities. While JioMart is now serving 200 cities and towns, Amazon Pantry serves 140, DMart serves more than 60, and both BigBasket and Grofers serve less than 50 towns and cities each.

The partnership between JioMart and Facebook will prove to be instrumental in the success of JioMart, currently, only a ‘minimum viable platform’ available on the web with a mobile application awaited. In certain cities, users can place their order through WhatsApp after sending a ‘Hi’ upon which a link is generated.

More than 11,000 stores and 50 warehouses across the country operating under Reliance Retail are expected to power JioMart’s delivery services. There have been scattered reports about Reliance wanting to open additional 300-500 smaller grocery stores to address last-mile delivery, apart from collaborating with existing kirana shops.

JioMart, in isolation, can be viewed as another e-commerce player in the market. However, in the greater scheme of things, it is another step in the making (read all about it here) of India’s first super app, combining a number of utility services under one mobile application and together known as Jio Platforms.

The super app will bring together Jio’s 387 million subscribers, apart from another 300 million, many concurrent, of WhatsApp, Facebook and Instagram users.

Already, Jio has ventured into many other digital services. These include Jio GigaFiber (a home broadband service) Jio Cinema (digital movie release on the same day as in the theatres), Jio Music, Jio TV, Jio HealthHub, Jio News, Reliance Digital, Jio Engage, Jio Cloud and Jio Switch, to name a few services currently listed on the Jio app.

Apart from the services already provided by Jio, in the future, the services could extend to education, logistics, food, farming, fashion, dating, professional networking, and so forth.

While Reliance’s Jio Platforms would be customised for the Indian market, Ambani seems to be taking the path China’s Tencent took almost a decade ago with WeChat.

By the third quarter of 2018, Tencent’s WeChat had around a billion users against Facebook’s 2.27 billion, YouTube’s 1.8 billion, WhatsApp’s 1.5 billion, and Twitter’s 326 million.

However, its growth in China had superseded that of Facebook globally. While it took Facebook more than 1,600 days to get to its first 100 million users, WeChat managed the same number in 433 days alone. Against 2.1 million apps for Apple’s App Store, WeChat had more than a million mini-programs (mobile apps integrated within the WeChat ecosystem and not warranting separate download, installation, or registration).

WeChat moved beyond being a social media app, and today connects China in more than one way. It can be used as a digital ID Card for registration in hotels, ticketing services, banks, etc, can be used as card for public transportation, can be used to book healthcare services, amongst an array of other services.

The success of WeChat lies in the fact that from being a cash-dominated society with 65 per cent of consumer cash transactions in 2011, WeChat Pay, a payment system within the ecosystem, generated digital payments worth $6 trillion in 2017. For the same year, PayPal generated transactions worth $450 billion only.

Like Jio Platforms may in the future, WeChat gives users access to chat options including IMs, video, voice, voice messaging, social media networking, digital wallets, banking, and other financial services, public services like weather checks, government updates, visa applications, healthcare, payment of utility bills, and other third-party services that run on the platform as mini-programmes.

These mini-programmes can include cab services, food delivery, airline booking, news subscriptions, and OTT streaming services.

Thus, users can go through their entire day in China with a single app alone. To make the super app most convenient for users, developers of WeChat integrated the use of the camera, light sensors, accelerometer, GPS, microphone, pedometer, and touchscreen available in the smartphone, thus becoming an enabler for many mini-programmes. For instance, GPS access could be used by a cab-hailing service.

Thus, the ecosystem of WeChat brought together the app, users, and business partners to create a seamless integration of infinite services. However, this also made WeChat the dominant digital landlord in a market of 1.4 billion people, thus eliminating opportunities for the smaller players, something similar to what Jio has been doing since 2016.

The mere possibility of Jio and Facebook, backed by other partners with relatively smaller stakes, of dominating the Indian market could push Airtel and Amazon closer to the prospect of a deal, if not a deal, for there is a lot at stake.

Firstly, Airtel would not want to miss the opportunity of creating a super app in collaboration with Amazon.

While the telecom carrier will bring 300 million users to the table, Amazon’s existing network of delivery services and online sellers could rival JioMart, to begin with, before venturing into other industries like online streaming (Amazon Prime v/s Disney Hotstar or Jio Cinema) and software services for micro, small, and medium enterprises (broadband and cloud solutions).

For instance, Reliance has developed a new service on its already existing 4G network, called the NBIoT, or the Narrowband Internet-of-Things (IoT). This will enable data collection from IoT compatible devices across India. For Airtel and Amazon, collaboration could mean challenging the dominance of Jio in the sector of IoT, both hardware and software.

Two, for Amazon Pantry, JioMart’s effective last-mile delivery network could upset revenues. Going forward, while JioMart could expand to more rural areas, Amazon Pantry would have to compete with JioMart not only on delivery time but also on a loyal subscriber base and rural expansion. A deal with Airtel could thus prove profitable given the network’s presence in rural areas.

Lastly, onboarding of local sellers and businesses through mini-programmes. What drove WeChat towards stupendous success was the integration of local sellers. These could include food delivery services, retail, fashion, and services confined to certain geographic areas. While Jio Platforms, going forward, could achieve this feat with ease, a super app in collaboration with Airtel could boost Amazon’s seller count too.

For Airtel and Amazon, in isolation, challenging Jio Platforms would be tough, given the number of digital services and platforms already in the pipeline. Together, however, they could challenge the dominance of Jio and India’s first super app.

Airtel, meanwhile, has issued another statement today (5 June), dismissing any claims of a possible deal with Amazon.

But then, never say never.