INDIAN MAGNATE’S STRUGGLING TELCO RALLIES AS INVESTORS BET ON RESCUE
▶ In our fortnightly roundup, Vodafone Idea delivers the best returns while one of Murdoch’s sons leaves his empire
Kumar Birla
For investors riding a rally in India’s wireless carriers, the best returns are coming from an operator that warned it could collapse without help from the government.
Although Vodafone Idea has not made a profit since 2017 and ended the last financial year with a record $10 billion (Dh36.7bn) loss, its shares have more than doubled in the past three months. The surge has been driven mostly by optimism that the Indian government will rescue the beleaguered telecoms company after the Supreme Court burdened it with billions of dollars in fees.
Gains made by the penny stock outpaced the 51 per cent jump for Reliance Industries, the conglomerate behind India’s No 1 telecoms company, and the 3.1 per cent gain for Bharti Airtel, the No 2 rival.
The joint venture between UK-based Vodafone Group and the group controlled by Indian billionaire Kumar Birla had already been struggling in the face of a devastating price war since the entry of Mukesh Ambani’s Reliance Jio Infocomm in 2016. Vodafone Idea has lost millions of subscribers amid intense competition and said it may no longer be a “going concern”.
“Vodafone Idea appeals to a very different class of investor,” says Vivekanand Subbaraman, associate vice president at Ambit Capital. “It is a market way of saying that if it survives, it is going to be worth a lot more.”
Rupert Murdoch
With James Murdoch, 47, severing ties with his family’s media empire, his brother Lachlan Murdoch – a prodigal son of sorts – is left as the last and most likely successor to their billionaire father Rupert Murdoch, 89.
When James announced that he was leaving the News Corp board –after clashing over the company’s editorial direction – it was just the latest step in distancing himself from the sprawling Murdoch operations.
Once tipped to take over from his father as the head of the family business, James is now focused on building his own collection of media and technology assets.
The split punctuated something that has become clearer for several years: Lachlan Murdoch, 48, is poised to take the reins when the time comes.
“We are grateful to James for his many years of service to the company,” Rupert and Lachlan, who serve as co-chairmen of News Corp, said in brief response to James’s departure. “We wish him the very best in his future endeavours.”
Lachlan was named chief executive of Fox Corp after the company sold most of its entertainment assets to Walt Disney in a $71bn transaction last year. James had run the business before the deal, when it was known as 21st Century Fox. But when Lachlan was appointed chief executive in 2018, his brother was not even mentioned in the press release announcing the move.
Lachlan has taken a roundabout route to succession. He abruptly quit the family business in 2005 and set up an investment company in Australia called Illyria.
During the years of his exile, his younger brother climbed the ranks. He ran BSkyB in Europe and News Corp’s media assets in the region, but a phone-hacking scandal in the UK hurt his reputation.
In 2014, Lachlan returned to the fold, taking senior positions at the newly split News Corp and 21st Century Fox. The following year, he became Fox’s executive chairman. James was chief executive of the company, but his older brother was firmly back in the family’s good graces.
When Disney agreed to buy most of 21st Century Fox, including its movie studio, James’s future became less clear. There was speculation that he would become a Disney executive while Lachlan Murdoch ran what was left of Fox.
Instead, he left to build an empire of his own. His investment company, Lupa Systems, is the backer of media and technology businesses
– everything from a Norwegian drone company to a chain offering virtual-reality experiences in malls.
Yuri Milner
DST Global, the investment company headed by billionaire Yuri Milner, is close to investing $400 million in Indian online education start-up Byju’s. The deal values Byju’s at $10.5bn and could be signed soon. The transaction would make the company India’s second-most valuable start-up after Alibaba-backed financial payments brand, Paytm.
Mr Milner, one of the world’s best-known technology investors, is an early backer of the largest internet companies such as Alibaba, Facebook and Twitter. DST has also funded a string of high-profile Indian start-ups such as online retailer Flipkart Online Services, ride-hailing start-up Ola, food-delivery start-up Swiggy and business e-commerce start-up Udaan.
Byju’s, whose investors include Facebook founder Mark Zuckerberg’s Chan Zuckerberg Initiative, Naspers and Tiger Global Management, simplifies maths and science concepts through games and videos.
It was founded by Byju Raveendran, a former teacher and son of educators, who conceived the smartphone app in 2011. The app caters to pupils and students in grade 12 and has more than 57 million registered users and more than 3.5 million paid subscribers. It is adding over 300,000 new subscribers every month.
Byju’s doubled its revenue in the year ended March 2020 to 28 billion rupees (Dh1.4bn) and is profitable, a rarity for Indian start-ups.
India’s online education segment is on fire after the coronavirus pandemic and resulting lockdowns shut schools across the country, prompting a never-before migration to online learning.
Byju’s raised $400m this year and was last funded by Bond Capital co-founded by Silicon Valley investment guru Mary Meeker, formerly of Kleiner Perkins.
Elon Musk
Elon Musk, 49, is having a fantastic year. SpaceX, the company he founded in 2002, launched two American astronauts to the International Space Station in late May and brought them safely home in a historic splashdown, heralding a new age of private-sector space travel.
Tesla, his electric car maker, recently celebrated its fourth straight quarter of profit and may soon join the S&P 500
Index. This year’s share rally has made the California company the world’s most valuable car maker, with a market value of roughly $267bn.
And then there’s Mr Musk himself. The businessman, who was born in South Africa , is now the 10th-richest person in the world, according to the Bloomberg Billionaires Index.
While the chief executives of the Big Four technology companies –Amazon, Apple, Facebook and Google – were derided as ‘Cyber Barons’ during a grilling by Congress last week on antitrust issues, Mr Musk basked in Style-section treatment in the New York Times.
It is a remarkable turnaround from the dark days of 2018, when Tesla struggled to increase production of the Model 3 sedan, scores of executives quit and Mr Musk was sued by the US Securities and Exchange Commission over his infamous “go private” tweet.
Since then, he has not endeared himself to everyone. Mr Musk has come under fire for downplaying the coronavirus pandemic, tweeting in early March that “coronavirus panic is dumb” and then predicting that the US would probably have “close to zero new cases” by the end of April. In California, where Tesla’s massive plant employs about 10,000 workers, Mr Musk defied public health authorities in Alameda County by closing the plant late and reopening it early, daring anyone to arrest him.
Yet, in a year when much of the nation is hunkered down or retrenching in the face of surging virus infections and widespread economic anxiety, Mr Musk is expanding. Tesla, which has 55,000 employees worldwide, is hiring and is building a new car plant in Austin, Texas, for its new electric pickup truck.
Mr Musk suggested that Tesla’s workforce could grow to 65,000 by the end of the year.