Reliance JIO: I Came, I Saw, I Conquered
In the 21st century mobile data is proving to be the oxygen. Mukesh Ambani understood this pretty well and brought a growth hacking strategy in India in 2015, which came to be known as RELIANCE JIO.
BY NANKIE BAWA | 7 Mins Read
Around 2015, all the existing telecom operators were earning their 60%-70% of their revenue from voice calls. Therefore, there was a price war among the operators for voice calls but all the operators were charging high prices for data as they were spending a lot of money to upgrade from 2G to 3G and further to 4G.
Amidst came Muskesh Ambani with an investment of 2.5 lakh crore INR, which was 3 times more than the investment of Airtel, Idea and Vodafone combined.
In a population of 130 crore, and more than 105 crore mobile connections activated till date, only 10% of the people used 4G and mobile data.
At this point of time telecom was a saturated market and the biggest headroom being data and not voice calls, as data had a lot of potential for growth.
The Bay of Bengal Gateway, a submarine communications cable system was created by the latest technology of Fibre Optic Cabling stretching over 8100 kilometres, is now live to handle bandwidth demand across its landing points in 6 countries. The new gateway has landing points in Fujairah (UAE), Barka (Oman), Mumbai (India), Colombo (Sri Lanka), Chennai (India), Mt Lavinia (Sri Lanka), Penang (Malaysia) and Singapore.
The fibre optic cables used in the BBG system employs Dense Wavelength Division Multiplexing (DWDM), which allows the capacity to be increased anytime without any additional submarine intervention. The initially available capacity is 9Tb/s; which can be extended up to 55Tb/s.
BBG also uses a cost-effective Digital Line Section (DLS) based model that allows optimum bandwidth utilization without the need of a reserved bandwidth unit, used in times of network congestion. Additionally, this allows each telecom operator of the consortium to carry out an upgrade whenever and wherever required.
Reliance Jio owns and operates BBG’s undersea cable landing facility in Chennai. It will use the exclusive bandwidth from the BBG cable system to offer high-speed broadband services in the country. It is also worthy to note that the Indian government has approved VoIP interconnection and spectrum liberalization - both which come as a boon to Reliance Jio.
Here, the main cost is the fixed cost, which all the other telecom operators like Airtel, Idea, Vodafone had had already invested in 2G/3G. Jio didn’t have to do all that, thanks to the fibre optic network, which will give Jio an internet speed, which will be 10x faster than any other company. As Jio didn’t have the burden of 2G, 3G technology, therefore it is the only operator to have 4G spectrum in all 22 zones of our country where Airtel had 15 zones, Idea had 10, and Vodafone had 8 zones only.
There was a time when came the White Revolution, then came the Green Revolution and now it’s time for Digital Revolution. The company giving data at a nominal rate, will rule the telecom industry.
Jio was launched with an offer providing free calls, free SMS, free roaming and was charging only for data and that too at a very nominal price.
Jio was providing 8 sims per Aadhar card and that also free of cost. They also increased the SIM activation speed from 24 hours to just 15 minutes by digital verification.
Jio had a strategy to capture 80% of the 105 crore mobile users in India, but even if we calculate the average revenue for just 50 crore people with an approximate average billing per person of 200 INR, the average revenue per month comes out to be 10,000 crore and average revenue per year would be 1.25 lakh crore.
In 2005, when the Ambani brothers had split their business, Mukesh Ambani already had an eye on Reliance Communications, which was acquired by Anil Ambani. Not giving up on his dream of starting a business in the telecom industry, he scraped off the “Non Competing Clause” in 2010 after constant efforts and started the journey of Jio.
After the launch of Jio, all the other competitors were facing an exit price strategy, because of the old technology; there was high cost of capital, expensive technology, and strong government licensing regulations made the exit barrier stronger. Switching to a newer technology was difficult after investing so much capital in the older one.
Jio didn’t face any of these problems as Jio didn’t invest in the older technology. Being the last mover Jio had the latest technology, making the entry barrier also stronger by the loss leading strategy, which is selling a product below its market cost, and the market penetration strategy, which is penetrating a market in which current or similar products already exist. Not only this, but also converting their competitive advantage into sustainable advantage.
With the combination of barrier pricing strategy, and the gun and bullet/ razor and blade strategy, Jio sold free 4G SIMs knowing now people would come and buy 4G enabled phones as in October 2015 limited people had 4G phones.
Before the launch of Jio, India ranked 150th in mobile data consumption and now India is in the top 10 consumers.
When all the telecom operators were doing their break-even analysis, Jio was focusing on customer perception/customer behavior analysis which lead to their sustainable advantage, building a Recurring Revenue Model.
Jio had a growth hacking algorithm, containing the following stages:
- Acquisition - When a company (Jio) acquires the users of other competitors (Airtel, Idea, Vodafone, etc.)
- Activation - When the users decide to use a product, i.e. because of the offers the company gives over other companies (Jio gave free sims, free calls, free SMS, and free roaming)
- Retention - When a company launches offers to retain the newly acquired customer base (Jio announced extension of the free period till March, 2016 which was called the Happy New Year offer and with this Reliance Jio became the first company to give free calls, SMS and roaming for 6 months)
- Referral - When a customer turns into a promoter.
- Revenue – When after all the investment revenue starts coming in. It is the last stage as now revenue will come constantly due to sustainable strategy.
In response to Jio’s move Airtel and Vodafone also launched their Customer Retention Pricing Packages. Airtel launched an offer, Buy a 2 year network of Airtel and get a 4G VoLTE phone free.
But even after all these efforts Jio became the leading brand in India, with an investment more than the combined investment in the past 20 years by the major telecom operators in India.
Even though Jio is ready with its 5G technology, they still need to improve upon their network so that voice over calls are improved which will give a better user experience and increased referral.
The Bottom Line
This article talked about the rise of Reliance Jio and its ability to wash away majority of the market competition and establish itself as the king of mobility business and nearly eliminate such competitions as Airtel, Idea, Vodafone, etc. Reliance Jio’s arrival in the market with 4G spectrum and its unlimited free offers have systematically destroyed all competitions and has established the Jio empire on its own. The introduction of brand new 4G technology and massive funding of Jio has left its competitors gasping for breath.