Am­bani’s New Gam­bit

India Today - - UPFRONT - By M.G. Arun

Ten months af­ter he launched Reliance Jio, a dis­rup­tive fourth gen­er­a­tion (4G) mo­bile tele­phony ser­vice based on long-term evo­lu­tion or LTE tech­nol­ogy, a form of high-speed wire­less com­mu­ni­ca­tion, Reliance In­dus­tries chair­man Mukesh Am­bani has sprung a new sur­prise. On July 21, at RIL’s an­nual gen­eral meet­ing of share­hold­ers in Mum­bai, he launched Jio­Phone, an LTE-en­abled mo­bile hand­set that also pro­vides bun­dled ser­vices such as JioTV and JioMu­sic. The most at­trac­tive as­pect is the price of the phone. It’s prac­ti­cally free, since the Rs 1,500 one pays while buy­ing the phone is a ‘se­cu­rity de­posit’, to be re­funded af­ter three years if the phone is re­turned to the com­pany. For Jio, which shook up the tele­com sec­tor with its ini­tial of­fer of data at a fifth the ex­ist­ing cost and voice free for­ever, the hand­set of­fer bridges a big user gap. It ad­dresses mil­lions of fea­ture phone users who are de­nied the ben­e­fits of even an en­try-level smart phone, which can cost Rs 3,000-4,500. Fea­ture phones in­cor­po­rate fea­tures such as in­ter­net ac­cess and stor­age and can play mu­sic, but can’t run third party apps like smart phones can. In­dia had 895 mil­lion mo­bile users in March 2017, half of them fea­ture phone users. The fea­ture phone mar­ket is dom­i­nated by firms such as Nokia, Sam­sung, Lava and Mi­cro­max. “Data is the oxy­gen of dig­i­tal life and no In­dian should suf­fer be­cause of data scarcity and un­af­ford­abil­ity,” said Am­bani at the launch. Jio­Phone users will also get un­lim­ited voice and data for Rs 153 a month.

But this new of­fer, com­mer­cially avail­able from Au­gust 24, can be tricky, not just for Jio but also for other tele­com com­pa­nies, whose prof­itabil­i­ties were al­ready hit by the tar­iff cuts ne­ces­si­tated by Jio’s en­try. Though over­all data traf­fic grew five-fold in the year to March 2017, 4G data prices fell 60 per cent, re­sult­ing in flat rev­enue growth for tel­cos, Crisil said in a re­port in April. Ex­perts say an­other 12 months of tar­iff war can bleed the sec­tor fur­ther, which is steeped in debts of Rs 5 lakh crore. The other is­sue has to do with sus­tain­ing the growth mo­men­tum achieved at low tar­iffs. At some point of time, com­pa­nies will have to re­vise tar­iffs to re­main prof­itable. The third is­sue has to do with Jio­Phone’s tar­get seg­ment. “For the tar­get seg­ment, even Rs 150 a month can be on the higher side, at a time when the av­er­age rev­enue per user (ARPU, a mea­sure of the sec­tor’s health) is be­tween Rs 120 and Rs 130 a month,” says Prashant Sing­hal, global tele­com leader at EY In­dia. More­over, even at Rs 1,500, Jio­Phone is still not a smart phone, and cus­tomers have the op­tion of go­ing for cheap used ones. Can Jio pull it off in hand­sets as it did in mo­bile ser­vices? Am­bani is con­fi­dent. “We have con­verted a ma­jor­ity of our free cus­tomers to paid cus­tomers. To­day, Jio has more than 100 mil­lion pay­ing Jio Prime (the com­pany’s key sub­scriber plan) cus­tomers,” he says. He is now bet­ting on sell­ing five mil­lion Jio­Phone hand­sets a month.

Though over­all data traf­fic grew five-fold in the year to March 2017, 4G data prices fell 60 per cent



RIL chair­man Mukesh Am­bani

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