What does Softbank's investment in Jio means for Indian telecom sector?

Jio became the fastest company in the world to achieve 100 million telecom subscribers in 170 days of starting commercial operations and recently announced that it has crossed 300 million customers mark in two-and-a-half years of its operations.

Japan's Softbank is reportedly looking to make a USD 2-3 billion investment in India's fastest-growing telecom firm Reliance Jio as billionaire Mukesh Ambani looks to deleverage business by selling stakes.

Jio became the fastest company in the world to achieve 100 million telecom subscribers in 170 days of starting commercial operations and recently announced that it has crossed 300 million customers mark in two-and-a-half years of its operations.

Also Read: Reliance Jio celebrating 300 million users base

Reliance Jio's launch in FY17 had unleashed one of the most brutal price wars in India's telecom market, and consequently, the industry's average revenue per user plunged about 38 per cent. Jio offered services free-of-cost for a long period of time which earned the deep-pocketed operator a base of loyal consumers when it finally started charging for its services.

Reliance Jio recently reported a 64.7 per cent increase in its net profit to Rs 840 crore in the March quarter of 2018-19. Jio subscriber base at end of the reported quarter stood at 30.67 crores and it registered an average revenue of Rs 126.2 per customer. The net subscriber addition of Jio during the reported quarter stood at 2.66 crores, while gross addition was 3.32 crore, according to a company statement.

Softbank is considered as a big player among the top investors and has a stake in many Indian companies like Flipkart, Snapdeal, Paytm, Ola.

It is not yet clear how much money will Softbank actually invest in Jio, but it is likely to disrupt the telecom market further. Both Reliance and SoftBank spokespersons declined to comment on the matter.

Investment Banker JPMorgan said in a research report said that "Softbank has long been seen as a potential investor in Jio. For the past 2 years, our conversations with investors have highlighted expectations of Softbank investing in Jio and hence the news flow is not surprising."

"In our view, for a meaningful de-leveraging, investors would likely want to see an equity inflow of more than USD 5 billion from a single investor or a combination of investors," JPMorgan said valuing Jio at USD 50 billion.