Reliance Jio4G Data War in Indian Telecom Space

Prepared by :Arindam Bhattacharjee

MBA (1st year)School of Management

NIT Rourkela

Contents• Introduction• Mr. Mukesh Ambani on Reliance Jio• Need for 4G• Telecom Sector Analysis• Growth drivers of telecom sector• Jio dials “D” for disruption• How data war is being fought• Future forecast• Financial impact made by Jio• SWOT Analysis• Conclusion

Introduction :

Contd…

• On March 10, 1876, Alexander Graham Bell spoke into his device and said to his assistant, “Mr. Watson, come here, I want to see you.”• In doing so, Bell launched the telephone era with the first bi-

directional electronic transmission of the spoken word.

INTRODUCTION :

SERVICES PROVIDED BY TELECOM SECTOR

Mr. Mukesh Ambani on Reliance Jio

Jio is a Tech, Not Telecom Company

In an interview with ET, Ambani said, “I have always believed that technology drives human civilization’s endeavour and progress. So if you ask what is my obsession, it is technology. I wish I was 30 years old today. The opportunity in front of us today is huge.”

He added that, “companies that had bet on mobile internet have created the largest value in the last 10 years. So, Jio is not really a telecom company. It is a tech company.”

Need for 4G :• Overall Device and Network PerformanceAssuming you live in an area with decent LTE coverage, you should immediately notice enhanced overall network and device performance when connected to LTE.• Streaming MediaAs more and more consumers move their digital media libraries to the cloud, the benefits of LTE will become crystal clear. • Sharing Your LTE Connection via Mobile Hotspot• Videoconferencing over LTELTE makes smartphone videoconferencing actually work. And work well. If you've ever tried to use a videoconferencing client over an HSPA+ or slower network, you know the experience is rarely a smooth one. 

Telecom Sector Scenario : Basics

Contd…

Trend of Internet subscriber base

Market Share (subscription) Analysis

Bharati23%

Voda-fone18%

Idea15%

Reliance Comm

11%

Tata7%

Aircel8%

Telenor5%

BSNL9%

Others3%

Subscriber Base (in 2015)

Bharati25%

Vodafone20%

Idea18%

BSNL9%

Reliance Comm

8%

Aircel9%

Tata5%

Telenor5%

Others1%

Subscriber Base (in 2016)

Overall Subscriber Base

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY160

200

400

600

800

1000

1200

429.7

621.3

846.3

951.3898

933987.3

1058.86

Subscribers(in millions)

Tele density (%)

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY160

10

20

30

40

50

60

70

80

90

37

52.7

70.9

78.7

73.3 75.278.7

83.36

Teledensity (%)

Gross revenue from telecom sector in India

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY160

500

1000

1500

2000

2500

1523.6 1579.81716.6

1954.42125.9

2338.2

1253.7 1217.9

INR (in billion)

Growth drivers of telecom sector

• Rising income• Increasing income in rural market• Increasing internet revenues• Relaxed FDI norms• Enhanced spectrum limit

Jio dials “D” for disruption• Lifetime Free Calls Mukesh Ambani, CMD of Reliance Industries has announced that voice calls on the Jio network won’t be charged, not even while roaming. He said that customers can’t be charged both for voice and data, and therefore, all voice calls will be totally free for Jio subscribers. 

• Welcome Offer With Free Access Till The End Of The Year

• Cheap 4G Phones For The Masses

• Lower Monthly CostsLooking at the monthly packs Jio is offering, the Rs 499 pack seems to be the one likely to become most popular. We think so since it’s the most affordable plan that spans almost a full month, and offers the entire bouquet to users. This plan comes with 4GB of 4G data, which suffice for most subscribers who have Wi-Fi access at home or office.

Contd…• Jio’s Premium Content, All For Free

Jio’s premium apps include JioBeats for music streaming and downloads, JioOnDemand for movies, JioPlay for live TV, JioMags for magazines, and JioXpressNews for news.

• No Blackout Days

Most existing telecom provides follow a system of blackout days, wherein any of their free SMS packs and offers are disregarded on high-volume days (such as on festivals, for example). Jio will not follow this practice, resulting in more savings for its users and more headaches for the competition. 

Contd…• Affordable 4G Data Costs

How data war is being fought ?Airtel: Airtel moved first in the market with heavy advertisement budget over the 4G experience, at every level of ATL and BTL they made huge investment.

Jio Preview Offer: Jio took its first step by providing first hand 4G experience to the employees and employee based referrals. They created buzz in the market with a wonderful media coverage and seeping users for “word of mouth”. No investment in advertisement so far.Vodafone joins the war and choose the side of Airtel, starts to inject money in advertising about its 4G experience, huge inflow for advertising and BTL activities.Jio launches bundled offering with LYF handsets ( establishes itself as a leading VoLTE based 4G handsets). Gathers a new set of Beta testers and plant more number of users for “word of mouth”. Only expenditure in BTL branding of partner stores for LYF and Gio.

Contd…

• Visible difference between the 4G quality and experience spotted by users and market starts comparison at open front tech bloggers, media houses join the party. ( Maybe managed campaign or spontaneous reaction)• Airtel become defensive and tries to change the game by talking about its

network quality and to in-cash trust factor of users over its network coverage. Campaign launch of “Open network”, again a high dose of ATL marketing for same.• Vodafone again follows the step of Airtel, starts talking about its “network”,

they start talking about “voice” and “network”• Jio takes next step by opening up preview offers with 4G handsets of different

brands like Samsung, LG, Videocon etc. (Please note even at this point, Jio is not selling services but only distributing the experience for free and planting more and more seeds with real data users who are equipped with 4G handsets)

Contd…• Airtel/Vodafone/Idea slash their data pack prices up to 80% to save their customer base

(They are not focusing towards fresh acquisition at this time but about saving their high ARPU customer base who is loyal to them but may move out because of huge price difference as compared to Jio)• These are the events which have taken place, till now Idea is not in picture as direct

opponent. Fight is between Jio and Airtel where Vodafone seems to be looking at Airtel to know the rules of the fight.• It shortens the sides, now there is only Jio Vs Airtel. Challenge with Airtel is to save its

customer base and challenge with Jio is to snatch the high ARPU customers of Airtel and let the second ally of Airtel i.e. Vodafone bleed by throwing them to third place.• Till now it seems that Jio is moving in right direction and has kept its priorities

right. Airtel is confused and trying to change the rule of the game from “4G” to “Network” which does not seem to work as Jio has made it clear that war is being fought over “4G” and the junta has second that it is about affordable 4G currently.

Future forecast• At present, around 3/4th of the revenues of telcos operating in India are generated

from voice calls. For instance, Airtel's voice calls account for 71% of its total mobile services revenues for the June 2016 quarter, while, for Idea, it was at 72%

•  With its unlimited free calling offer, Jio is hitting the telcos where it hurts most, the biggest threat being the possibility of customers migrating to Jio. If operators match Jio's offers, it would make a significant dent on their overall revenues & profit margins.

• If they bring down calls to near-zero, even that would result in major losses. What's worse is that contribution of data revenues is still minuscule for the telcos to make up for the loss in voice revenues. 

Contd…• Jio's strategy of offering free voice is an innovative way for enticing

consumers to upgrade to 4G phones. As Jio's focus will be to retain majority of the subscribers when they commercially launch, first as a secondary SIM and over time by offering better network as primary SIM. • At present only 25% of mobile phone users have smart-phones & among

them only 10-15% are using 4G. Jio is not going to work on feature phones & non-4G phones. Therefore, it will have to rely on fast adoption of 4G phones, going forward.• · Jio’s network is based on new Voice over LTE (VoLTE) technology & is

the first Indian operator to do so. Just like any new technology, there will be hiccups initially, which could slower the churn of users. A lot will depend on the overall customer experience provided by Jio.

Contd…•One of the pillars Ambani expanded on was the Jio app ecosystem.

There’s a JioTV app, a JioCinema app, a Jio Music app, a personal digital wallet & a Jio Magazine/Newspaper application to contribute towards adding value & generating revenues• ·Reliance Jio’s entry may force operators to bid aggressively in the

upcoming auction, especially Vodafone & Idea.• ·Most analysts believe that R-Jio would need 75-80 million

subscribers with an average revenue per user (ARPU) of Rs.180 for EBITDA break-even over the next 2-3 years; execution and customer care being the key.• It has late mover’s advantage.

Financial impact made by Jio

Contd…• As per CLSA (Credit Lyonnais Securities Asia) Jio’s plans are

competitive, in the near term, their acceptance constrained by limited availability of 4G handsets and steep premium to current 3G subscriber ARPUs. • With fresh risks, CLSA lowered our FY17-18 Ebitda and earnings

estimates for Bharti Airtel and Idea Cellular by 2-19%. • However, key for Jio will be subscriber retention beyond free offers.

In the new landscape, data capacity play Bharti Airtel and Reliance Jio are better placed given the lead in spectrum and network. • Retain Buy on Bharti Airtel (target price Rs 398 from Rs 440) and Sell

on Idea Cellular (target price Rs 79 from Rs 94).

SWOT Analysis• Strengths : Low tariffs, very wide network and brand name

• Weakness : Operation of Mobile Number Portability Still not smooth, Highly dependent upon data consumption

• Opportunity : Large scale availability of smart phones, Increasing rate of data consumption, International market

• Threats : Saturated market, Highly competitive market, Changing Government Policy, Rapid upgradation in Technology

Latest developments • Apple CEO Tim Cook said Apple is partnering with Reliance Jio,

which is offering free usage of data for a year to purchasers of new iPhones, to ensure "great iPhone performance" on their network.

• Citing Reliance Jio's roll-out of 4G coverage in India, Cook said his company "couldn't be more excited" about the enormous investments being made in high-speed telecom networks, even as he conceded that Apple’s smartphone has "not done as well" in the country

Conclusion

• Reliance Jio has brought “MAGIC” in Indian telecom sector which can be explained as follows :• M: Multimedia at affordable price• A: Annihilation of expensive tariff plans• G: Growth in 4G handsets sector• I: Internet made afordable• C: Customer Satisfaction

THANK YOU

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