Namaste, Sat Sri Akaal, and Salaam. 🫡

Happy morning folks. Hope life is good.

Today we’re diving into -
- Ambani’s monster cash-raise for 5G rollout,
- Netflix’s plans to conquer India so far,
- And Krafton’s newest fund.

Our read time today is 4 minutes and 56 seconds - faster than SKY suddenly found his form again. 🙈

Let's dive in. 👇

Market Vibe Check

5G cash crunch forces Jio to look for backers. ⚡

TLDR -
- Jio is raising $2bn of debt to fund their 5G infra plans.
- This is gonna go toward buying all the tech that they need from Ericsson.
- Biggest two problems - INR depreciation and a LONG list of monetization issues.

Jio is playing a massive 5G game, and they’re putting some money where their mouth is.

Ambani and co. just raised $2 billion from a consortium of banks including BNP Paribas and UBS.

This money is gonna be used to pick up all the 5G cells that Jio needs for their network (primarily from Ericsson) and to fund some other tech infrastructure, and will need to be paid back over

Sounds brilliant, but there are 2 big things that could go wrong.

1 - Rupee depreciation

INR depreciation is the “hidden cost” of living in India - this debt is denominated in USD, so repayments will also be in USD.

The exchange rate weakens 4-7% a year, so that burdens Jio with an effective 4-7% EXTRA interest rate.

2 - Monetization is far out

5G monetisation is AT LEAST one year away.

There are barely any 5G devices on the network and phone makers are only JUST coming out with their 5G enabled models.

These are (obviously) a little more expensive, which means that they sell slower in India’s price-elastic market.

Killer…

Netflix’s India plans seem solid so far. 🤔

TLDR -
- Netflix is now giving away subscriptions for free along with prepaid Internet plans.
- Pretty unorthodox, since Netflix makes ¼th the money from an Indian user vs. a North American user + they have premium positioning.
- Gives Netflix instant distribution to Jio’s 450mn-strong user base.

Netflix is making a run into India’s streaming segment with the support of the world’s largest telecom provider, Jio.

They’ll be bundling 3-month Netflix subscriptions along with 3-month phone plans.

The specifics are boring, but here are 3 big-picture things to keep in mind.

1 - Netflix makes a LOT less money from India

As a streaming platform, one metric is KEY.

It’s the ARPU - average revenue per user.

A North American user gives Netflix $16.6 per month.

An Indian user gives Netflix $6.5 per month.

In other words, a North American user is “worth” 2.5X more than an Indian one to Netflix.

2 - Jio is giving them effortless distribution.

With the flick of a switch, Netflix gets access to Jio’s entire user-base of 450 million subscribers.

Even if Netflix takes a loss on these bundled customers, they make up for it with the free marketing & interest from users that subscribe after their Jio plan ends.

3 - India’s telecom market still runs on “recharges”

Over 75% of India doesn’t use postpaid plans.

They top-up their phones with “recharges”.

This is effectively a 3-month recharge with a world-class OTT subscription - making it SUPER value for money in the market.

Solid move of business chess.

Krafton gets a go-ahead for their $150mn gaming fund. 🎮

TLDR -
- South Korean gaming giant Krafton is investing $150mn into India thru a gaming incubator.
- Their flagship game BGMI only just got reinstated and they’ve come back with tons of dry powder.
- India’s gaming sector is rather cold - not too much investment and excitement of late.

A boon for India’s gaming ecosystem - BGMI maker Krafton is all-set to invest $150 million more into startups.

BGMI is basically a jazzier version of PUBG, and it’s easy mobile compatibility has helped it swarm the Indian market.

The game actually got banned from India a year back, but was just reinstated - which is probably why Krafton’s got this fund ready.

This $150mn is gonna go into homegrown gaming startups, because the sector is SUPER thanda atm.

They’ve spent $140mn over the last 2 years on Indian businesses with investments into Kuku FM, Loco, Pratilipi, and Nodwin Gaming.

Pretty small, and very gaming-centric.

In other news… ☕

America tries stopping CZ from coming to Dubai (BBG)

Elon calls Tesla’s strikes in Sweden “insane” (FT)

America’s chip export ban starts hammering Chinese startups (TC)

Barclays gets ready to cut $1.5bn in costs

A $90bn UAE SWF gets a new CEO (BBG)

And that’s the tea the chai for today.

Thanks for reading, and we hope you enjoyed it. Have a mauj-masti filled day.

Lots of ❤️,

Team Cutting Chai