At a time when Indian telecommunication companies are blamed for charging much more than they ought to, Reliance Industries Limited (RIL) chairman Mukesh Ambani seems to have brought a revolution in this sector with the commercial launch of Reliance Jio Infocomm (Jio) on September 1, 2016, at the Reliance Annual General Meeting. From providing highly attractive introductory offers in voice calling and 4G services to its ambitious plan of capturing up to 10 per cent of over 1 billion-strong customer base, Jio has caught the attention of both mobile subscribers as well as mobile service providers. It aims to serve 100 million subscribers by the end of this year, with an addition of 1 million subscribers per day. Following this, Reliance plans to make revenue in the range of ₹36,000 crores to ₹50,000 crores in FY17.
In an impactful speech, which cost Bharti Airtel and Idea Cellular approximately ₹12,000 crores in losses in under 45 minutes, Mukesh Ambani announced a series of measures which is set to directly affect mobile users’ behaviour, waging a “tariff war” with incumbent players in the telecom sector. From issuing free SIM cards and providing lifetime free voice calls (local plus national roaming) to providing free mobile data till December 31, and lowest data rates per megabit consumption (4G data rates will see a decrease from ₹250/GB which is charged by the incumbent players to ₹50/GB), advent of Jio is sure to have sent jitters down the telecom sphere. It is said that competition leads to better performance, but in all this brouhaha, future seems bleak for the likes of Aircel and Telenor. How Bharti Airtel, Vodafone or Idea Cellular effectively react to this is yet to be seen. A battle for providing the lowest tariff will not be a surprise.
The erstwhile Infotel Broadband Services Limited was rechristened as Reliance Jio Infocomm in 2015. Jio was previously launched as a beta service to its employees and partners in December 2015. As far as the initial investment in this project is concerned, Jio is supposedly world’s biggest venture with ₹150,000 crore investment. With a very strong backing by RIL, it is all prepared to take initial blows in terms of direct losses till 31 December. It will only start making revenue from January 2017 when it begins to charge for its data usage (from ₹149 to ₹4999 on a monthly basis). Apart from data services, it aims to leverage revenue from various digital services like video streaming (with a feature similar to Netflix) and other sources, not to forget the already profit-making RIL.
All this is indeed a welcome step towards digital literacy, especially as it is brought about by a private entity. This will motivate other players to step in — a step they must take in order to survive in the competition. According to media reports, Vodafone and Airtel have called Jio’s offer a “gimmick” while the state-owned BSNL has pledged to match Jio “tariff-by-tariff”. At the current stage, Reliance Jio has everything to experiment with, owing to its strong financial support. What is left for other big players is to prevent an exodus of their top customers to Jio, for 30% of the customers contribute to 70% of their revenue. The launch of Jio seems to have been played out positively on consumer sentiment. Whatever level of competition and commotion this leads to, the end beneficiary is going to be the customers. And this is what really matters to us.