The number of mobile users in India is increasing day by day and the currently India stands in 2nd position in the world in the number of mobile users and third in internet users. This makes India a hot market in telecommunication sector with big players trying to woo their customers with their plans and services. The 3G market was getting expensive and the mobile data users were quite unhappy with the expensive plan. Anyone watching the market would understand it was a volcano waiting to erupt. And that’s when the masterstroke of 4g played by Reliance Industries. Mukesh Ambani introduced free data services and free calling using 4G network.
The ambitious plan and such a business model have sent everyone in a jiffy as to how they will earn profits. Everything Jio have done till now is intended at making money. Their tariff plans may look unbelievably awesome, but they will make more money by giving free voice calls than what the other companies make by charging you for it!
In India, the monthly average revenue per user (ARPU) the current network providers get is around Rs. 150 per month. That is the money they get on average from each user. If you spend over Rs250 per month, you are considered a high-value customer.
For one, voice telephony will be bundled with data. So at the bottom of the pyramid, there is a price point of Rs 19 for the occasional data user, then on to a monthly tariff of Rs 149 plan for the light data user – going all the way up to a monthly Rs 4,999-plan for the heaviest data user.
The tariff announced also has to be read with two other factors – the target he has set for his Jio team, and the push towards affordable devices.
He wants the team to quickly cobble up 100 million subscribers, against the current broadband base of 150 million subscribers in the country. Apart from this, he said the prices of smart handsets under the company’s LYF brand will start from Rs 2,999.
In fact, just ahead of Reliance Jio announcements, Analyses Mason – a top global consulting firm focused on digital media – said in its latest report that data tariff is pretty steep in India even by the developed nations’ standards and that there is scope for a 75-percent cut to push usage.
The consultancy said an average monthly increase in data usage to 10.2 GB at a discounted tariff of Rs 57 per GB, with 10 percent contribution from voice, will translate into a total increase in monthly average revenue per user of Rs 645. In Jio’s case, the average tariff may be much lower without the 10 percent contribution from voice telephony and a sharp cut in data tariff.
But the voice telephony for Reliance Jio is not the traditional 2G or 3G offering, but over the Internet. This, the chairman, explained has its own dynamics. The company is also betting big on compelling applications and content, currently worth Rs 15,000 per annum, as also superior digital service experiences.
Immediate revenue is of no concern to Mukesh Ambani. The Reliance Jio endeavor is a big bet on the future, and the company’s present aim is to establish the ideal eco-system for when that future arrives.
Despite having a massive user base, internet penetration and speed in India is woefully low when compared to other countries. Only about 24.3 percent of the Indian population accessed the internet through mobile phones in 2016. But the figure is expected to rise to 37.4 percent in 2021 as the Indian population, particularly in rural areas, becomes progressively ‘digital’.
As an increasing number of people will require mobile and internet connectivity in the coming decade, Reliance Jio will be in the prime position to capture the massive untapped market.
Jio’s ambitions aren’t limited exclusively to mobile internet. The company plans to rake in profits from its LYF brand smartphones, broadband internet offerings, and Jio mobile applications — the entire suite, which includes apps like Jio Music, Jio TV, Jio Cinema, and a digital wallet, will be charged as a Rs 15,000-per-year subscription. Reliance also plans to consolidate its ‘Digital India’ missive with the setting up of Jionet Wi-Fi hotspots in multiple cities — Mumbai, Kolkata, Surat, Ahmedabad, Indore, Mussoorie, and Lucknow are among the cities which currently feature these hotspots in select locations.
Internet of Things (IoT) has been widely touted as one of the most promising technologies of the near future. Understanding the potential of this burgeoning sector, RIL in November entered into a partnership with US-based General Electric (GE) to enter the industrial IoT space.
The partnership, under which RIL will reportedly develop software applications for GE’s Predix cloud platform, will provide IoT solutions to customers in various industries such as telecom, healthcare, oil and gas, and power among others. Driven by the industries’ need for increasing operational efficiency and the widespread use of data analytics, RIL will generate vast new revenue streams not only in India but around the world.
High-risk high rewards
Mukesh Ambani’s business philosophy is a simple one — ‘nothing ventured, nothing gained.’ He has recognized mobile internet to be the most profitable venture in the long run and has consequently invested considerable time and money to make RIL the foremost company in the sector.
RIL’s, and by extension Jio’s, credo is founded on the principle that a business needs a purpose beyond just making profits. As Ambani told ET in an interview, “I believe that if you create societal value if you create customer value and employee value, and if you focus on these, then shareholder and economic return is a by-product.”
And going by the current scenario, in which Reliance Jio is certainly creating societal and customer value, the company will very likely rake in monumental revenues in the future.