THE FORTUNATE SON
For a decade India’s richest man waged a blood feud with his younger brother for control of the subcontinent’s telecommunications industry. Now Mukesh Ambani shares the inside story of his ultimate triumph—Jio, an ultra-cheap 4G broadband service whose bi
For a decade India’s richest man waged a blood feud with his younger brother for control of the subcontinent’s telecommunications industry. Now Mukesh Ambani shares the inside story of his ultimate triumph—Jio, an ultra-cheap 4G broadband service whose biggest winners will be the millions of ordinary Indians who suddenly consume more mobile data than either the U.S. or China.
On a cool, dry evening late last year, 50,000 employees and friends of Reliance Industries, India’s most valuable company, packed into a cavernous temporary stadium 25 miles outside downtown Mumbai to celebrate the firm’s 40th annual “Family Day.” Another 200,000 people dialed in via video link to watch the show, which was hosted by Bollywood mega-celeb Shah Rukh Khan (33.6 million Twitter followers), singer Sonu Nigam (18.8 million likes on Facebook) and veteran actor and game-show host Ambitabh Bachchan, who staged a round of Who Wants to Be a Millionaire? The five-hour event culminated with dazzling fireworks and a midnight feast featuring vegetarian delicacies like chickpea-and-riceflour dumplings, spicy cottage cheese and lentils.
But the real star of the occasion was Mukesh Ambani, Reliance’s 60-year-old chairman, managing director and largest shareholder and the 19th-richest man in the world, with a net worth of $40.1 billion. “Can Reliance be among the top 20 companies in the world?” he called out to the crowd, which obediently raised their lamps, turning the arena into a moving sea of lights. “Yes, we can! Yes, we will!”
Ambani’s ambition is understandable given the scope of what he has already achieved. Reliance is the 106th-larg-
est company in the world, having earned some $4.6 billion in profits last year on $50.9 billion in sales. The firm is a major player in oil and gas and operates one of the largest oil refineries in the world. It is the largest retailer in India and has important ventures in life sciences, textiles and telecommunications. Its Network18 media subsidiary has partnerships with prominent Western brands like CNBC, CNN, MTV and Nickelodeon (television), Paramount Pictures (film) and Forbes (print).
But what really has Ambani excited—and has set Reliance’s share price on fire—is his $33 billion investment in Jio, a 4G broadband service that has attracted 160 million customers since it was introduced 18 months ago. More than half those subscribers signed up in the first six months, when Reliance jump-started the business by offering the service for free. They stayed because Jio has promised never to charge for domestic calls and its data rates are supercheap. That hypergrowth has boosted Reliance’s stock by over 70% in the past year and added $16.9 billion to Ambani’s fortune. Analysts call it the “Jio effect.”
But for Ambani, Jio is about more than adding 11 figures to his net worth. He believes the firm is igniting a subcontinental data revolution that will help solve some of India’s intractable problems in areas like agriculture, education and health care.
“Can Jio be the first company to transform an entire nation in each one of these sectors?” Ambani continues, whipping up the crowd. “Yes, we can! And, yes, we will!”
Or as he sometimes says more succinctly, “Data is the new oil.”
MUKESH AMBANI IS PROBABLY best known outside India for building the world’s most expensive privately owned home, a 27-story sky palace that looms above South Mumbai and cost an estimated $1 billion. There, with his wife, Nita, a member of the International Olympic Committee and the chair of one of India’s premier soccer leagues, he frequently entertains luminaries from the worlds of sport, fashion and entertainment. “I have just one home,” he says somewhat defensively, “not 30 or 40 around the world, as some do.”
But within India, Ambani is equally well-known for his decadelong blood feud with his younger brother, Anil, 58, who was pointedly not invited to the Reliance Family Day bash in December.
Their father, Dhirubhai Ambani, was born to a poor schoolteacher and grew up in a remote village not far from Porbandar, the birthplace of Mahatma Gandhi. Dhirubhai never finished high school, quitting to help support the family. He spent seven years working in a gas station in Yemen— where Mukesh was born in 1957—before returning to India to set up a spice-trading business with his brothers from a tiny 500-square-foot Mumbai office. Then in the 1960s, the siblings expanded into yarn and began importing a new wonder fabric, polyester.
By 1966 the “Prince of Polyester” had built his first synthetic textile mill in his native Indian state of Gujarat. The entrepreneur persevered through stifling bureaucracy and endemic corruption until, in 1977, when India’s nationalized banks refused to finance further expansion, he took Reliance public. The offering was marketed to middle-class Indians and heavily oversubscribed. The 58,000 mostly small-town Indians who decided to gamble wouldn’t regret it. Over the coming years, the shares appreciated sharply, placing Dhirubhai firmly on the path to an eventual $6.6 billion fortune as he expanded into petrochemicals, refining and oil-and-gas exploration.
“My father foresaw that India could become globally competitive and always thought in terms of scale. That became the DNA of Reliance,” Ambani says from the company’s 36-yearold downtown offices, surrounded by images of his late father, including a super-realistic 3-D-printed bust.
In 1986, when Dhirubhai suffered a stroke, Mukesh and Anil took more responsibility. The brothers were tight. They worked side by side during the day, and their families lived together on different floors of a 14-story family-owned highrise. By the time Dhirubhai died in 2002 at age 69 from a second stroke, Reliance was India’s largest family business and arguably its most influential.
Before his death, Dhirubhai had been keen to start a mobilephone service for the masses that would provide voice calls for less than the cost of a postcard. At the time mobile phones were toys for the rich, with expensive monthly fees. Inspired by their father’s dream, the brothers jumped into mobile telephony.
“Some of us are bigger risk-takers than others,” Mukesh says. “Without taking some risk, there is no fun in life.”
Reliance started a discount telecom service in 2002, shaking up the market and sending mobile rates tumbling from 32 cents a minute to 2 cents. But behind that success an ugly battle was brewing as the brothers began fighting for control of the company.
Dhirubhai died unexpectedly, without a will, but the understanding within the family—at least as Mukesh saw it—was that whoever was chairman of Reliance (conveniently it was
Hypergrowth has added $16.9 billion to Ambani’s fortune in the past year.
him) would have total management control. Anil, who was vice chairman, didn’t see it that way and wanted to have more of a say. Mukesh felt he had done all the behind-the-scenes work of building the big plants and refineries. He was also said to be closer to his father, who was initially furious when Anil decided to marry a Bollywood starlet, which he didn’t feel was an appropriate choice. (Mukesh’s wife had been chosen by his father.) Anil, who is more articulate and extroverted than his brother, was in charge of finance and was the face of Reliance to bankers, investors and journalists. He was closer to his mother.
After prolonged bickering, fueled by the fact that their wives didn’t get along, their mother, Kokilaben, brokered a peace, and the family empire was divvied up in 2005. Mukesh got to keep the biggest piece, Reliance Industries, the flagship oil-and-gas business; Anil got the newer businesses such as telecom, financial services and the power-generation unit.
The split gave a temporary massive boost to the brothers’ largely public fortunes. By 2008 the brothers’ combined worth was a staggering $85 billion. Mukesh was the fifth-richest person in the world, with a fortune of $43 billion. Anil was a close No. 6 with $42 billion; his biggest asset was a 65% stake in the telecom company, then worth $20 billion.
The financial crisis, coupled with bad blood, took its toll. It was soon evident that the rapprochement between the brothers was only on paper. When Anil sought to merge his telecom firm with South Africa’s MTN in 2008, Mukesh intentionally stalled the deal, citing the family settlement that gave him the right of first refusal on any stake sale in the telecom unit. In 2009, shares of Anil’s companies plunged, wiping away nearly $32 billion of his wealth. A year later, after a legal skirmish, the brothers terminated their noncompete agreement.
Suddenly the path was clear for Mukesh to get back into telecom.
MUKESH STARTED SMALL—and stealthily—by acquiring a little company in 2010 that had a license to provide only broadband internet. But Ambani knew “voice” was really just another type of data and that the rules would eventually have to change. When they did, in 2013, Mukesh was ready.
He started building at a feverish pace, tapping into Reliance’s construction, regulatory and execution expertise to quickly create a countrywide network that, by end of this year, will number 260,000 towers (some leased) and 186,000 miles of optical fiber. He worked with electronics giants Qualcomm and Spreadtrum to design low-cost 4G handsets, a major leap forward in what was then largely a 2G market, selling them for a refundable security deposit of $22. In all Reliance has spent $33 billion on the project to date, funding it with a mix of debt ($7 billion), equity ($17 billion), plus deferred payments and supplier credits ($9 billion).
Jio was impossibly cheap and impossibly fast and, perhaps most impressive given India’s size, nearly ubiquitous, available in 95% of the country. The incumbent players struggled merely to stay in business. Telenor and the Tata Group both sold their wireless operations to telecom tycoon Sunil Mittal’s Bharti Airtel, a joint venture with Singapore’s Singtel. Onetime rivals Vodafone India and Idea Cellular, owned by billionaire Kumar Birla, agreed to merge to better withstand the onslaught. And Mukesh, completing the humiliation of his younger brother, bought the remains of Anil’s debt-strapped telecom business for an estimated $3 billion-plus. It had once been worth $43 billion.
“It was purely a business decision,” Mukesh says. “It works for us, and we’ll make the most of it.”
Thanks to Jio, India’s annual mobile data traffic has jumped to over 15 billion gigabytes from just over one billion a year ago. In data consumption, India now ranks above China and the U.S. Jio alone carries more mobile data traffic than Sprint, Verizon and AT&T combined.
Ambani has grand visions for how all that information can transform his country and lift it out of poverty. He cites the example of Indian agriculture, which is plagued by poor productivity and low quality. “I see all such inefficiencies as opportunities,” Ambani says. Jio has developed a platform for India’s 120 million farmers, most of whom have small landholdings, that offers technical information on sowing and harvesting in addition to realtime market prices and access to top agricultural experts.
Ambani also sees Jio playing a role in transforming Indian education. Within a year, he hopes, Jio will have connected 35 million students attending India’s colleges. At the same time, he wants Jio to reach the remotest corners of the country, right down to the smallest villages.
Of course, this will all remain a pipe dream if Jio doesn’t find a way to make money. Thanks to some aggressive accounting, the company managed to squeeze out a small profit ($78 million on revenues of $1.1 billion) in the final quarter of 2017. But Jio’s core strength—that it’s cheap—works against it financially.
To succeed, Jio needs to sign up many more subscribers and then upsell them into consuming lots of data through apps like Jio Cinema (6,000 movies) and Jio Music (16 million songs). Once they are hooked, Jio will have to raise data prices without losing too many customers. Its current rates aren’t sustainable.
Ambani seems unfazed by the economics and willing to invest for the long haul. He is grooming his three children to take over the business and is increasingly comfortable with a view of Reliance from 39,000 feet. “These days I’m in the mind-set of being nose in, fingers out,” he says, meaning keeping his nose in the boardroom and his hands out of operations. A Jio IPO is on the horizon, but for now he’s basking in the glow of having provided millions of ordinary Indians with access to highspeed internet and all its attendant opportunities.
“This is a race,” he says, “that India is running with the rest of the world.”
Completing the humiliation, Mukesh bought the remains of his brother’s debt-strapped telecom business for $3 billion.