Is Reliance Industries Ltd’s (RIL’s) Jio project the digital equivalent of a giant squid that will gobble up everything in its way? While that statement is definitely over the top, the company’s aspirations are sky-high, and investors are gung-ho about the company’s prospects in marrying its connectivity infrastructure with all forms of digital services.

“Jio’s implied enterprise valuation is already higher than Bharti Airtel’s India wireless business, according to our estimates," said Somshankar Sinha, head of India equity research at Jefferies India Pvt. Ltd. Since its revenues are less than two-thirds the size of Airtel’s India wireless business, this suggests investors are pricing in much more than the gains that can accrue from just its wireless business.

“Reliance Jio is clearly not positioned as a mere telco. Its business model has a wireless piece, which we now see; then there are the non-wireless businesses such as home broadband and enterprise, and finally digital services that overlay the connectivity pieces. Who’s to say Jio will not be successful in becoming an integrated telco and digital services company five years from now?" says Sinha.

Some of the confidence among investors stems from Jio’s rapid growth in the past 18 months, making it India’s largest mobile broadband company by a fair distance. They now dream that if all goes according to plan, customers will talk, shop, bank, read, write, eat, watch digital content and book a holiday using a Jio app provided on a Reliance Jio connection. Its supporters point out this is much like what online services firm Tencent offers customers in China, although they leave out the little detail that Tencent isn’t a telecom company.

The Reliance Jio they dream of, therefore, is more like a combine of China Mobile and Tencent. This only makes sense for a telco that has a market share that’s far higher than 50%. If, as most analysts expect, Reliance Jio ends up with about a third of the market, it’s not clear why customers would prefer Jio apps for digital services, rather than others that are network-agnostic. One of the reasons apps such as Tencent’s WeChat and Facebook’s WhatsApp are popular is they can be used across different networks. To be used as an all-in-one kind of service by a vast majority of telecom subscribers, a telco first needs to garner an outsized share of the market.

One of the factors that has added heft to the giant squid theory is the company’s flurry of M&A (mergers and acquisitions) activity in the past few months, involving firms that provide digital content. RIL, the parent company, already owns Network 18, one of India’s largest media firms.

But critics point out that RIL’s investments in content are far too small to count. “If Jio has ambitions of being an integrated telco and content company, it would need to start matching companies such as Star on their high bids for sports content. Its recent M&A strategy in the content space is too small to count," a senior executive at a media company said on condition of anonymity. While Reliance Jio’s investments in its telecom business are running at around $35 billion, its investments in content, including RIL’s purchase of Network 18, are at only around $1 billion.

According to an analyst at a domestic institutional brokerage firm, “Jio’s investments show where its priorities lie; right now, content seems to be a mere add-on." Besides, incumbent telcos are already trying to match Jio’s content offers to subscribers.

In Australia, Singtel Optus Pty Ltd, the second largest telco in the country, has procured exclusive rights to air the English Premier League a few years ago, as a growth strategy. While it spent a high amount to bid for the content, in hindsight, this helped it grow subscriber market share.

An equivalent in India would be the Indian Premier League, for which Star spent around $2.5 billion to purchase broadcast rights. As the media executive quoted above says, if Reliance Jio is serious about using exclusive content to distinguish itself, its spends on content would need to start matching that of Star.

All told, investors seem to be putting the cart before the horse. “We feel the market may be under-appreciating risks and challenges. Jio’s wireless business itself is in a fairly early stage of growth, vis-à-vis the capacity created by the company and its own aspirations. As such, it may be too early to call out the project’s success. In earlier times, investors had been equally excited about Reliance’s India upstream and shale gas investments, but it was only years later that it became apparent, in hindsight, that the hope was misplaced," says Jefferies India’s Sinha.