The game changing incumbent and big data war in the country
Text: FWD Media Inputs from: Dipin Damodaran Illustration: Jithin Mohan
The ground has been set and the battle is on. It’s vigorous, unprecedented and spellbounding. The audacious and smart business strategies of none other than India’s richest man Mukesh Ambani during the announcement of Reliance Jio certainly has made resounding ripples all around. According to Forbes, with a net worth of $22.7 billion (INR 151896, 02, 85,000), Mukesh Ambani has fortune that is equal to Estonia’s GDP. The entrance of such a man to the telecom space has literally paved the way for a war in India’s hyper-competitive mobile services market and thereby giving Ambani the title of disruptor. Jio or Reliance Jio has gone viral throughout India with their attractive plans including free voice calls and cheap data packs in the telecom space, which is heavily packed with the offerings of other players from India’s big business houses.
“Today Indian citizens pay a low rate for voice services, and very high rate for data. Not just free voice, Jio also promises to remove customer pain points of blackout days, bill shocks, nontransparent, and difficult-to-understand bills”, sais a Jio official.
Democratisation of smart phones
Smartphones are devices with limitless applications. With the advent of smartphones, society got introduced to new type of mobile technology which provides personal information management applications and wireless communication capability. This revolution enabled people to stay informed, entertained, and connected at any time. As networks have evolved from 1 G, 2G, 3G, today smartphones providing 4 G services are gaining popularity among the public. According to a latest report, in India there are about 371 million users who surf internet via smartphones.
India will see exponential growth in the coming few years in data usage and internet access through the mobile, which will get millions of Indians conducting business, getting social and participating in governance with the help of smartphones. As per data released by country’s telecom regulator in January 2016, India’s mobile phone subscriber base surpassed 1 billion user mark, making the country second largest market for smartphones. Also with 4G handsets, supporting multiple spectrums being made available at an optimal price range, there will be a strong trigger of growth of the smartphones. Hence, the little device in Indians’ pocket is proving to become their window to a world of information, education, livelihood, employment and even shopping and commerce.
While launching the Jio Mukesh Ambani addressed the issue of slow infrastructure as the cause for call drops and said that his venture will embolden Prime Minister Narendra Modi’s pet project called Digital India: an $18 billion plan to connect India’s cities and villages to the Internet with a combination of broadband connectivity and Wi-Fi.
Digital Campaign
Digital India is a plan envisioned by Modi “to transform India into a digitally empowered society and knowledge economy”. Digital India was launched as a campaign to ensure that Government services are made available to citizens electronically by improving online infrastructure and by increasing Internet connectivity or by making the country digitally empowered in the field of technology. PM Shri Narendra Modi described technology as a means to “discover, learn, evolve and implement.” The key to the programme is about turning highspeed internet into a core utility.
Recently in his speech in Digital India- Power to Empower in US, emphasizing the role of e-governance, he said “After MyGov.in, I have just launched the Narendra Modi Mobile App. They are helping me stay in close touch with people. I learn a great deal from their suggestions and complaints. We want to free our citizens from the burden of excessive paper documents in every office. We want paperless transactions. We will set up a digital locker for every citizen to store personal documents that can be shared across departments. We have set up Ebiz portal to make approvals for businesses and citizens easy and efficient so that they concentrate their energy on their goals, not on government processes.” Digital India Campaign aims at using technology to impart scale and speed to development.
PM Modi also highlights that the government has attacked poverty by using the power of networks and mobile phones. He said, “Facebook, Twitter, Instagram are the new neighbourhoods of our new world. The status that now matters is not whether you are awake or asleep, but whether you are online or offline.” Government driven initiatives such as Make in India gained momentum in the last year to attract more players in the mobile value chain. Almost half of total mobile phones shipped in India today are assembled in the country driving the Make in India trend. Similarly Jio aims to fulfill the need of Indians by providing them access to information without any barriers as said by Ambani on the day of Jio launch. “Reliance Jio’s 4G data speed and apps seem to be perfect platform for PM Narendra Modi’s Digital India programme,” he added.
With an aim to take over the mobile market, Jio’s starting phase of the race has been exceptional. The INR 1.5-trillion (till July 2016) investment by Reliance Industries has offered users the liberty to consume free voice calls and internet data till December 31. According to TRAI data, the end of June 2016, the subscriber base of Jio stood at 1059.86 million. According to the latest report, Jio’s 4G network already covers 18,000 cities and towns and over 2 lakh villages.The figure is expected to rise significantly as Jio aims to fulfill MukeshAmbani’s ambition of reaching the 100 million customer mark in the shortest time possible. To attract more customers, the company is now planning to hit the digital TV spaceand introduce the cheapest DTH service available in the country.
As per a report by Morgan Stanley Research, Jio will garner 40 million subscribers in 2017-18. This substantiateswhat MukeshAmbani had said on the commencement of Jio operations- “I am confident that Jio will play a significant role in lifting India from its current 142nd Rank on internet penetration to amongst the Top 10 nations in the world”.
From Voice to Data
Today, voice calls based on internet applications on smart phone – Whatsapp, Signal, Skype, etc are being done on data. Chat apps are more becoming the center for entertainment, engagement, socialconnect and also in the e-commerce section like food apps, taxi apps, shopping apps. Thus with the voice calls made free by the new entrant, the basic character of the sector is been revolutionized. In one day the game has changed entirely from voice calls to data packs as voice calls has been made free for life time and customers can make calls globally through various data-based apps on Jio sim cards.
But this has been met with discontentment from the other telecom service operators. As reported in Economic Times article, a recent BhartiAirtel report said, at current revenue realisation every 1% of voice minute that is substituted by a call through an app would lead to a Rs 1,200 crore revenue loss to the industry. “It’s clear that voice margins and revenue are decreasing, but data growth isn’t adequately compensating for revenue loss from voice,” said Rajan Mathews, Director General of the Cellular Operators Association of India, an industry body representing GSM based operators such as BhartiAirtel, Idea Cellular and Vodafone India.
The data war
“A minimum of 200 Jio sim cards are distributed from a Jio outlet in a day”, an employee at Reliance Jio outlet told FWD Business. To meet this competitive threat from Reliance Jio, other telecom players have started aggressive plans to retain and attract data users. This indicates that Jio has been creating waves in the sector.
However, initial shock waves of expected churn in the sector are visible with the damp and lack-lustre response that Government of India received in the recent spectrum auction. This indicates that industry is not willing to commit new capital on a fresh spectrum at this moment. And it is believed that, if Reliance Jio finds acceptance in the market, then companies could prefer to explore M&A (Merger and Acquisition) opportunities and consolidate their spectrum, instead of committing capital and also borrowing to buy new spectrum, which could possibly lead to a spate of M&As in the sector. Mobile telephony sector is at the cusp of growth driven by various factors like increasing mobile penetration and upward mobility of consumers who have now started consuming data on mobile which is driven by significant reduction in prices of smart phones and data. The future of mobile telephony would be in data, and Reliance could bring about a paradigm shift in the sector, if it succeeds in offering quality services at attractive prices even after December 31st.
To counter Jio which offers free voice calls, zero roaming charges, 4G plans at Rs.50 per GB; India’s secondlargest telcom brand Vodafone India recently launched a pack offering 1GB of mobile data at Rs 55 for prepaid subscribers. Even minions like Aircel and Tata Teleservices too have launched data plans of 1GB at Rs 24 and Rs 50 respectively. Even the major telecom player Bharti Airtel extended the 10 GB data offer at Rs 259, which was earlier available exclusively for Samsung J series phone.
After exchanging several communications with the three operators, the TRAI arrived at the decision that each of them has been non-compliant to provide anoughPoI between them and Reliance Jio. But there’re also allegations that the speed of Jio’s 4G service is less when comparing with other players. Call drop has also become an issue for Jio. But, whatever be the case, Jio made an impact in the sector. Jio Welcome Offer has enrolled 16 million customers in 26 days. The company has announced that Jio has created a world record by crossing 1.6 crore total subscribers during the first month of operations in September 2016. The company claims that the new venture has the fastest growth than any other telecom operator or start up in the world including Facebook, WhatsApp and Skype. According to some unconfirmed reports, the subscribers of Jio crossed 24 millionmark at the end of September .
Why we call Mukesh Ambani’s Jio a disruptor?
The answer lies in his own words, “I have great pleasure in announcing a revolutionary concept for the Indian market. All voice calls for Jio customers will be absolutely free. ”The era of paying for voice calls is ending. Jio has ushered India into a new age. Across India, to any network, there are no voice call charges for Jio customers. This is a major disruption in the sector. The future of telecom sector is going to be data-oriented. At the time of launching, Jio’s 4G network already covered 18,000 cities and towns, and over 2 lakh villages. Mukesh Ambani has an ambitious plan of covering 90% of India’s population by March 2017.
Telecom Expert
“Reliance Jio’s entry in mobile telephony sector would have significant implications on the sector in short to long term. However, it is pertinent to note that Reliance Jio is still offering free data and we would want to wait and see how consumers accept it. Keeping this in mind, it would be premature to predict the impact on the sector at large at this stage,” Sumeet Mehta, a Mumbai-based industry expert, told FWD Business. “Anticipating a price war in the sector cannot be ruled out if Reliance Jio manages to attract new customers in short to medium term. We can safely anticipate that existing players are also closely watching this and would act based on how Reliance Jio performs after the initial free data offer period. Mobile telephony sector is laden with debt, as players have borrowed for spectrum and building infrastructure. Interest outgo forms a significant part of the expenses of the company. Hence, we believe that till then existing players would not wish to start a price war and start bleeding,” Sumeet added.