Reliance Jio raises $500M from a consortium of Japanese banks to fund expansion

16th Apr 2018
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Jio will acquire the wireless assets of Anil Ambani’s Reliance Communications and will roll out its FTTH broadband service shortly. It is also working on 4G-enabled laptops that can potentially disrupt India’s PC market. 

Reliance Jio has raised close to $500 million (Rs 3,250 crore) in funding from a consortium of Japanese banks. The loan would be utilised to fund Jio’s ongoing capital expenditure, Reliance announced.

Jio’s samurai loan (which refers to low-interest loans raised from Japan’s debt market) is the biggest thus far for an Asian corporate. The consortium of lenders included Mizuho Bank, MUFG Bank, and Sumitomo Mitsui Banking Corporation (Singapore branch).

It said in a statement, “Reliance Jio has signed an approximately 53.5 billion Japanese yen samurai term loan with 7-year bullet maturity. The facility is guaranteed by Reliance Industries Ltd. and will be used for funding ongoing capital expenditure.”

The announcement comes shortly after the Reliance Jio board approved the raising of about Rs 20,000 crore debt in tranches. Reliance Industries has already invested close to Rs 2 lakh crore in its telecom unit since the Jio rollout in September 2016.

Jio has been the fastest-growing mobile network in India, notching up 168 million customers in under two years, and triggering a wave of consolidation in the domestic telecom sector.

Mukesh Ambani-led Reliance Jio Infocomm will also acquire wireless assets of Anil Ambani’s Reliance Communications for Rs 25,000 crore. Part of the samurai loan would be utilised in that. Reports suggest that Jio, which functions like a startup, might also be raising debt from a few Indian private banks.

Capex to fund expansion

Jio is focused on building a future-ready telecom network in India that can support technologies like 5G and beyond. “Jio will bring transformational changes in the Indian digital services space to enable the vision of Digital India for 1.2 billion Indians and propel India into global leadership in digital economy,” it said in a statement.

RIL Chairman Mukesh Ambani had announced in last year’s AGM that Jio services would reach 99 percent of India’s population by the end of 2018. After disrupting mobile telephony in India with dirt-cheap data offerings, Jio has now turned its attention towards the home broadband market.

Jio Broadband launch might just be around the corner. The beta trials are underway in several locations across the country. Consumers can expect a host of freebies, unlimited usage and high-speed connectivity at 100 Mbps from Jio’s FTTH service. Brokerages estimate that Jio Broadband can add up to $5 billion in RIL’s valuation. 

Reliance is also said to be looking at entering the consumer product space with a low-cost 4G smartphone (that is already under production) and Windows 10 laptops that can run on 4G SIM cards. It is collaborating with leading chipset manufacturer Qualcomm for the same. A JioHome TV service might be on the cards too.

The move to diversify beyond basic mobile services will significantly increase Jio’s average revenues per user (ARPUs) in the time to come and give it a significant edge over competitors Airtel and Vodafone-Idea, which too are engaging in various activities to ward off the “Jio Effect”. 

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