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US Equity Giant KKR To Invest Rs 11,367 Crore In Jio Platforms

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New Delhi:

Reliance Industries on Friday announced the sale of a 2.32 per cent stake in its digital unit to US private equity giant KKR for Rs 11,367 crore, the fifth deal in four weeks that will inject a combined Rs 78,562 crore in the oil-to-telecom conglomerate to help it pare debt.

This is KKR’s largest investment in Asia.

“This transaction values Jio Platforms at an equity value of Rs 4.91 lakh crore and an enterprise value of Rs 5.16 lakh crore. This is KKR’s largest investment in Asia and will translate into a 2.32 per cent equity stake in Jio Platforms on a fully diluted basis,” the company said in a statement.

The deal follows Facebook picking up a 9.99 per cent stake in the firm, housing India’s youngest but largest telecom company, on April 22 for Rs 43,574 crore.

Within days of that deal, Silver Lake – the world’s largest tech investor – bought a 1.15 per cent stake in Jio Platforms for Rs 5,665.75 crore.

On May 8, US-based Vista Equity Partners bought 2.32 per cent stake in Jio Platforms for Rs 11,367 crore. On May 17 global equity firm General Atlantic picked up 1.34 per cent stake in Jio Platforms for Rs 6,598.38 crore.

“Over the last month, leading technology investors, such as, Facebook, Silver Lake, Vista, General Atlantic and KKR have announced aggregate investments of Rs 78,562 crore into Jio Platforms,” it said.

Diverse marquee investors are becoming long-term shareholders of Jio Platforms Ltd (JPL) because of a unique set of technologies and platforms under one entity. There are no similar opportunities available anywhere else globally. And an endorsement of the quality of the management.

Investments by leading global growth investors will enable Jio to scale its ecosystem and reaffirm the firm as a next generation software product and platform company.

“Jio Platforms, a wholly-owned subsidiary of Reliance Industries, is a next-generation technology platform focused on providing high-quality and affordable digital services across India, with more than 388 million subscribers,” the statement said.

Founded in 1976, KKR has a long history of building leading global enterprises and successfully investing in businesses in the technology sector, including BMC Software, ByteDance and GoJek, through its private equity and technology growth funds.

Since inception, the firm has invested over USD 30 billion (total enterprise value) in tech companies, and its technology portfolio currently has more than 20 companies across the technology, media and telecom sectors.

 

In addition, India has been a key strategic market for KKR with a history of investing in the country since 2006.

Mukesh Ambani, Chairman and Managing Director of Reliance Industries, said, “I am delighted to welcome KKR, one of the world’s most respected financial investors, as a valued partner in our onward march to growing and transforming the Indian digital ecosystem for the benefit of all Indians.”

KKR, he said, has a proven track record of being a valuable partner to industry-leading franchises and has been committed to India for many years.

“We are looking forward to leveraging KKR’s global platform, industry knowledge and operational expertise to further grow Jio.”

Henry Kravis, Co-Founder and Co-CEO of KKR, said, “Few companies have the potential to transform a country’s digital ecosystem in the way that Jio Platforms is doing in India, and potentially worldwide. Jio Platforms is a true homegrown next generation technology leader in India that is unmatched in its ability to deliver technology solutions and services to a country that is experiencing a digital revolution.”

“We are investing behind Jio Platforms” impressive momentum, world-class innovation and strong leadership team, and we view this landmark investment as a strong indicator of KKR’s commitment to supporting leading technology companies in India and Asia Pacific,” he said.

KKR is making the investment from its Asia private equity and growth technology funds.

The transaction is subject to regulatory and other customary approvals.

Morgan Stanley acted as financial advisor to Reliance Industries, and AZB & Partners and Davis Polk & Wardwell acted as legal counsel. 

Deloitte Touche Tohmatsu India LLP acted as financial advisor to KKR. Shardul Amarchand Mangaldas & Co. and Simpson Thacher & Bartlett LLP acted as legal counsel to KKR.

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Elon Musk Plans IPO for SpaceX’s Starlink Business

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By Reuters | Updated: 29 September 2020

Tesla Chief Executive Officer Elon Musk plans to list SpaceX’s space internet venture, Starlink, several years in the future when revenue growth is smooth and predictable.

“Public market does not like erratic cash flow haha,” the billionaire entrepreneur tweeted on Monday.

Musk said last year that Starlink was an important new revenue stream for his California-based Space Exploration Technologies, or SpaceX.

SpaceX President Gwynne Shotwell in February floated the idea of spinning Starlink off for an IPO in the coming years.

SpaceX is racing to build out its Starlink satellite constellation to offer broadband internet commercially by the end of 2020.

Musk, in his tweet, also said he is a “huge fan” of small retail investors and will ensure they get top priority.

© Thomson Reuters 2020

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Samsung Signs Verizon as First US Customer for Indoor 5G Gear

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By Reuters | Updated: 25 September 2020

Samsung Electronics has signed up Verizon as its first customer in the United States for its 5G products to increase indoor coverage, weeks after winning a $6.64 billion (roughly Rs. 48,932 crores) order for telecom equipment from the mobile network operator.

A small player until recently in the telecom equipment business, Samsung has gained ground in recent years and is challenging the dominance of Nokia and Ericsson in telecom gear.

It has also benefited from China’s Huawei getting barred from bidding for 5G contracts in the United States.

Samsung’s new 5G portfolio will help operators add coverage and capacity indoors, be it homes of users or factories and warehouses, Alok Shah, Vice President of Network Strategy at Samsung, told Reuters.

He said the company was in talks with other US telecoms operators.

Indoor coverage is crucial for 5G as the millimetre wave radio frequency used by the likes of Verizon faces problems in passing through walls or other obstacles. Samsung had a 3 percent market share of the total global telecoms equipment market in 2019, behind No. 1 Huawei with 28 percent, Nokia’s 16 percent, Ericsson’s 14 percent, ZTE’s 10 percent and Cisco’s 7 percent, according to market research firm Dell’Oro Group.

The South Korean company is positioning itself between the traditional suppliers and the ones like Mavenir and Altiostar, which are using software to run network functions on the cloud dubbed Open Radio Access Network (RAN), reducing the use of physical equipment.

Larger suppliers are more protective of their current market share and smaller players who are pushing the envelope on technology don’t have the skill at this time. Samsung sits right in the middle, Shah said.

“We have scale that we can bring to bear, but we’re also a challenger and we’re very hungry and aggressive,” Shah said. “So far that’s really been the secret sauce for us to bring both sides of that coin to customers.”

© Thomson Reuters 2020

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Huawei Chairman Urges US to Reconsider ‘Attack’ on Global Supply Chain

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By Reuters | Updated: 23 September 2020

Chinese telecom giant Huawei said on Wednesday its supply chain was under attack from the United States and called on Washington to reconsider its trade restrictions which were hurting suppliers globally.

The world’s biggest maker of mobile telecommunications equipment and smartphones is under pressure from US trade curbs designed to choke Huawei’s access to commercially available chips.

“The US has modified their sanctions for the third time and that has indeed brought great challenges to our production and operations,” Huawei Chairman Guo Ping told reporters in Shanghai.

Washington says Huawei is a vehicle for Chinese state espionage and from September 15 imposed new curbs barring US companies from supplying or servicing the company. Huawei has repeatedly denied being a national security risk.

Guo said that although Huawei had sufficient chips for its business-to-business operations, including its 5G network enterprise, it was feeling the pinch of the US restrictions on its smartphone chip stocks.

It understood that suppliers such as Qualcomm were applying for US licences which would allow them to continue serving Huawei, he added.

Intel has already received licences to supply certain products to Huawei, while China’s Semiconductor Manufacturing, which uses US-origin machinery to produce chips for Huawei, has applied for a licence, Reuters has previously reported.

Huawei was willing to use Qualcomm chips in its smartphones should Qualcomm get a licence to sidestep the restrictions, Guo added. Qualcomm did not immediately respond to a request for comment.

“We hope the US government can reconsider its policy and if the US government allows it we are still willing to buy products from US companies,” Guo said on the sidelines of its annual Huawei Connect conference.

Huawei has said that from September 15 it would stop manufacturing its most advanced chips under its Kirin line which power its high-end phones. Analysts expect its existing supply of Kirin chips will run out next year.

Consumers have rushed to buy Huawei phones amid concerns its mobile division is about to fold. Vendors say that prices have spiked by as much as CNY 500 (roughly Rs. 5,400) for some devices.

Washington has shown little sign that it is willing to back down from its fight with Huawei, which comes at a time when relations between the United States and China are at their worst in decades.

The United States said last month it would expand a programme it called “Clean Network” to prevent various Chinese apps and telecoms companies from accessing sensitive information on American citizens and businesses.

David Wang, a Huawei executive director, said the company hoped that countries would introduce “rational standards” for 5G. Huawei had yet to see any adverse impact on its global 5G business from the US programme, he added.

© Thomson Reuters 2020

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Huawei Plans More Cuts to Jobs, Investment in Australia

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By Reuters | Updated: 22 September 2020

The Australian operation of Chinese telecommunications equipment maker Huawei said it would continue to cut staff numbers and investment in the country amid strained relations between Beijing and Canberra.

In 2018, Australia banned Huawei from supplying equipment for a 5G mobile network citing national security risks, a move the company criticised as being politically motivated.

“In simple terms the 5G ban on Huawei has cost us 1,000 high-tech and high-wage jobs from the economy,” Jeremy Mitchell, Huawei’s chief corporate affairs officer for Australia, said in an emailed statement.

“We have gone from 1,200 staff to fewer than 200 and by next year it will be lower still.”

The Australian Financial Review first reported the comments.

Huawei had terminated AUD 100 million (roughly Rs. 530 crores) of research and development investments in Australia since the 5G ban, Mitchell said.

Huawei last month said it would end its sponsorship of an Australian rugby league club a year earlier than expected due to a downturn in its business.

Diplomatic relations between Australia and China have soured this year after Australia called for an independent international investigation into the source of the coronavirus pandemic.

Beijing was angered by the move and has since blocked Australian beef imports, placed dumping tariffs on Australian barley, and launched an anti-dumping investigation into Australian wine.

© Thomson Reuters 2020

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EU Top Court Gives Thumbs Up to Net Neutrality Rules

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By Reuters | Updated: 16 September 2020

Europe’s highest court on Tuesday gave its backing to the European Union’s net neutrality rules which require telecoms operators to treat all Internet traffic equally, dealing a blow to the telecoms industry which wants a less restrictive regime.

Adopted in 2015, the rules, which have got strong backing from large tech companies and consumer groups, prevent telecoms operators from blocking or slowing down traffic, or offering paid fast lanes.

Telecoms operators have been pushing for less stringent rules to allow them to increase revenues from specialised services such as connectivity for driverless cars and Internet-connected devices to offset declining turnover from their traditional telephony business.

The Luxembourg-based Court of Justice of the European Union (CJEU) in its first ruling on the subject backed the principle of an open internet.

“The requirements to protect internet users’ rights and to treat traffic in a non-discriminatory manner preclude an internet access provider from favouring certain applications and services by means of packages enabling those applications and services to benefit from a ‘zero tariff’ and making the use of the other applications and services subject to measures blocking or slowing down traffic,” judges said.

The European court’s judgment came after a Hungarian court had sought guidance in a case involving Hungarian mobile telecoms operator Telenor Magyarorszag. The Hungarian company offered its customers preferential or so-called zero-tariff access packages, which meant that the use of certain applications did not count towards consumption.

Hungary’s National Media and Infocommunications Authority in two decisions in 2017 said the company violated EU network neutrality rules and ordered it to scrap the offers.

Telenor Magyarorszag, which is part of Czech investment group PPF, had challenged the rulings in a Hungarian court. The company said the EU court judgment would not affect its business as it had already complied with the Hungarian regulatory decisions.

“This means that Telenor does not differentiate between the speed of online music streaming services and messaging services from any other type of data traffic in the plans in question (MyChat and MyMusic),” the company said in a statement.

The case attracted attention in Germany, the Netherlands, Austria, Finland, Romania, Slovenia and the Czech Republic, which submitted comments to the EU court.

Three years ago, the United States repealed its landmark net neutrality rules, giving internet providers sweeping powers to recast how Americans use the internet, as long as they disclose changes.

The European court cases are C-807/18 Telenor Magyarorszag & C-39/19 Telenor Magyarorszag.

© Thomson Reuters 2020

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Verizon to Acquire Prepaid Mobile Service Tracfone in $6.25 Billion Deal

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By Reuters | Updated: 15 September 2020

Verizon said on Monday it will buy pre-paid mobile phones provider Tracfone, a unit of Mexican telecoms giant America Movil, in a $6.25 billion (roughly Rs. 45,932 crores) cash and stock deal.

Tracfone, which serves about 21 million subscribers through more than 90,000 retail locations across United States, said more than 13 million of its subscribers rely on Verizon’s network under an existing agreement. Verizon is the largest US wireless carrier by subscribers.

The US wireless industry is concentrated in the hands of three mobile carriers due to several merger deals in recent years: T-Mobile, which in April completed its $23 billion (roughly Rs. 1,69,032 crores) merger with Sprint to solidify its position in the United States, AT&T, and Verizon.

America Movil, which was created from a state monopoly, is Mexico’s largest telecoms operator by far and is controlled by the family of Mexican billionaire Carlos Slim, the Latin American nation’s richest man.

Tracfone had become popular with the lower end of the ultra-competitive US telecoms consumer market and Verizon now plans to provide new products for that segment after this “strategic acquisition,” said Hans Vestberg, chairman and chief executive of Verizon.

“This transaction firmly establishes Verizon, through the Tracfone brands, as the provider of choice in the value segment, which complements our clear leadership in the premium segment,” added Ronan Dunne, executive vice president and group CEO, Verizon.

Shares of Verizon were up more than 1 percent in morning trading. American Movil shares jumped more than 3.5 percent when the Mexican market opened.

The deal would include $3.125 billion (roughly Rs. 22,972 crores) in cash and $3.125 billion (roughly Rs. 22,972 crores) in Verizon stock.

Credit Suisse is acting as financial adviser to Verizon on the deal, which is expected to close in the second half of 2021.

© Thomson Reuters 2020

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