There have been several tremendous investments and operations undertaken by large corporations in the past, which have changed the world as we know it. One such investment that hopefully turned out to be absolutely triumphant was the Reliance Industries’ new telecom venture named ‘Reliance Jio’.
Mukesh Ambani, the head of Reliance Industries, India’s largest conglomerate, shelled out $35 billion of the company’s money to provide the South Asian nation with its first all-4G network. By offering free calls and data for peanuts, the telecom latecomer upended the industry, setting off a cheap internet tsunami that is opening the market of 1.3 billion people to global tech and opportunities.
I will try to analyse how Reliance Jio turned the telecom industry upside down, how successful Jio has been, and what allowed them to have such a clear path to success.
Reliance Jio officially launched its commercial operation on September 5, 2016, and it has drastically changed the telecom sector with its free voice calls and cheap 4G services that changed the way Indian users consumed data.
Mukesh Ambani was well versed in the revenue streams of the existing players in the market. Upwards of 60-70% of the revenue was generated through voice call charges. Also, there existed a strong price war for voice call charges. The telecom industry was absolutely saturated with the negligible scope of any growth or outsider’s entry. But, Ambani being one of the greatest business minds on the face of the Earth, knew exactly where to strike and reap the benefits. The mobile data market in India was very limited mostly because of the high prices. Out of the 1.05 billion connections, only 10% used 4G and internet and therefore, mobile data lacked competition and had the biggest headroom for growth and development. Ambani found a sweet spot to invest in within such a saturated market and created an all-new space in the market.
He brought in the latest 4G technology in India whereas other service providers such as Airtel, Vodafone, and Idea needed huge capital to upgrade their existing 2G and 3G networks to 4G. He invested a whopping $35 billion into the new technology which was 3 times bigger than the combined capital of all the three major service providers at the time. Other service providers did not have the resources to counter and bring in the latest technology. Additionally, there existed an exit barrier for them as they had already invested huge sums of money in the older technology whereas Jio didn’t have any such obligations.
Having invested so heavily in Reliance Jio, the biggest hurdle for the company to be successful was to attract customers, and this is where the genius business model of Jio comes into play.
Jio used a loss-leading strategy for the first six months after launch, providing free unlimited voice calls and mobile data. The company’s 4G data services provided consumers the option to watch more online videos and other content than ever before, something that became apparent when India jumped ahead of the US and China to take the position of world’s biggest consumer of mobile data. Eventually, the company’s services did become paid, but that did not stop the Jio juggernaut– primarily because of the ultra-low tariff the company levied for its data. This strategy not only shifted the customer base towards Jio but also acted as an entry barrier for other providers in the industry as they could not operate under such conditions which, eventually, helped Jio to create a sort of monopoly in the mobile data market. The biggest advantage Jio had was its low cost of capital. Reliance used the cash flow from its traditional businesses to subsidise cheap prices to potential subscribers, and to kill off weaker competitors that had to rely on expensive bank loans. Moreover, they extended their free services to March 31, 2017, in order to retain the customer base and also expand it even further.
Here’s a look at how the telecom industry revolutionised after Jio’s entry.
Ultra-cheap data: Before the entry of Reliance Jio, data was rather expensive and consumers had to shell out up to ₹450 (on some networks) for 1GB of data. The highlight of Jio’s launch offer was the free data it was offering to consumers, with 4GB of high-speed 4G data per day, followed by continued data at 128kbps speed. Eventually, the company had to launch chargeable plans after incumbent operators protested, but even then the tariff was so low that consumers paid roughly Rs. 10 per GB of 4G data - something other operators also started to offer in response.
Increased consumption of online content: India saw an exponential rise in the consumption of online content with the availability of free data. Jio claims India’s data consumption went from 200 million GB to 1200 million GB in six months.
Free voice calls: Voice calls became free for all consumers across networks when Jio launched operations. The company has said both local and STD calls will always be free on its network, to all networks.
Proliferation of 4G smartphones: The market for 4G smartphones exploded as a result of the gun and bullet strategy after Jio services were launched as everyone had access to the company’s 4G network for free.
Faster mobile data: With 4G becoming the norm in the market, mobile data speeds rose too, considering most people were on 3G networks before that. According to the latest data by the Telecom Regulatory Authority of India (TRAI), Jio offers an average download speed of around 18mbps.
A record in user acquisition: In February, Jio claimed its telecom network had garnered 100 million users in less than six months of operations. At the time, Chairman Mukesh Ambani had said this growth is faster than even what global giants such as Facebook and WhatsApp recorded. The Jio user base currently stands at more than 387 million.
Improved broadband internet availability: With the free internet, millions of people got access to high-speed 4G services, and Jio became the country’s biggest provider of broadband internet – and that’s without even counting in the JioFiber service that the company recently started.
Not only has Jio revolutionised the telecom industry, but it is also bringing in changes in society and education. With the easy availability of internet services in every remote corner of the country, people are now much more aware than they ever were about what is happening around the globe. Additionally, the online education industry has seen a boom with companies like Byju’s and Unacademy making great progress as every student with a mobile phone can now access the resources which earlier were not available to them. Kids living in villages where teachers often never show up for classes can now use their Jio smartphones to study online. Offsprings of the elite- who are sent to expensive cram schools to prepare for entrance exams- will now face competition from kids who have studied online in the hinterlands, thanks to Jio.
Jio is on the way to transforming itself into a platform for the vast population of India. A platform from whose ecosystem people cannot escape. We have been witnesses to the meteoric rise of many such platforms across the globe. Not only that, but we have also been the victims of such platforms for the last decade. Today, people’s lives seem incomplete without WhatsApp or Instagram, which is Facebook’s way of confining us within its limits. Google, Amazon, Apple, every major global player you name has a way of limiting our reach to their own services. And Jio’s move to be that platform provider for India has attracted global attention in these past few months. Everyone wants to be a part of this revolution and wants to get access to the large market that India offers to the world. Because of this, Reliance has been able to make Jio net debt-free ahead of its goal of March 31, 2021.
The fact is very simple that after the white and green revolutions, Jio has brought a digital revolution in India. In the 21st century, data is the new oxygen and Jio has provided a way to access this data and bring a change. The success of Jio shows how a single man’s vision can bring a change in the lives of 1.3 billion people.
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