What Jio did in the Indian Telecom and Digital Landscape is nothing short of exemplary. From getting launched in September 2016 and incurring losses, to getting profitable in the 3rd quarter of 2017 itself. Roughly 18 months and a start-up idea that originated during the early decade turned profitable after shaking up the entire telecom sector.
But, how did Jio achieved all this in such a short span of time? Especially in a sector where the likes of TATAs and Birla’s have failed to consolidate their position. Read on.
Jio implemented a 4-fold strategy to disrupt the sector and make a space for its usage. The first phase started with burning of cash. Jio acknowledged data & internet accessibility as a serious problem in the country and spent around 1.5 lakh crore in setting up Jio infrastructure along with rolling out free SIMs, voice calls and data. Data usage was relatively new to India at that time with major carriers charging roughly about Rs.250-300 per GB per data per month. However, free data and voice calls became an instant hit among the Indian middle class especially in Tier 2 and Tier 3 towns. The craze was so high that Jio completed 5cr subscribers (subs) in around 80 days. The plan was set for the implementation of the second phase.
Phase 2 was about product habituation. Once anyone got a Jio sim, no one was worried or bothered to crib about talk time or data. And everyone recklessly cultivated the habit of using internet on the go. This was also a kind of a live project for Reliance as it was testing its telecom servers and systems in a live customer environment. There was no major pressure of delivering quality in a timely manner as the services were free of cost. This gave the management the much needed time leverage to set up the whole infrastructure in the country with simultaneous operations running. This was also the time when Indian govt announced demonetization and was pushing the economy towards digital adoption. Host of new banking and financial apps were launched, financialization of savings garnered strength, and people started moving towards a web/app based consumer culture. All this required good internet access and Jio was present at the right time & at the right place.
Now entered the most important phase of Jio’s rise. In phase 3, the customer habituation needed to be built to such an extent and there is no looking back. And it was observed that people were so habitual to internet by this time that it reached to a point of no return. This irreversibility confirmed that Jio has done something that the incumbents like Airtel and Vodafone, took years and decades to build. Jio just changed the fabric of telecom sector from voice based culture to data based culture. This led to an irreversible change especially in the younger population with small tasks like booking a cab and paying utility bills all getting online.
With the customer habits and irreversibility in check, in came the last phase (Phase 4). Jio started charging money from its subs for the services it offered. The charges were so nominal in comparison to what people were used to paying that in just 1.5 years Jio became profitable (Q3 2017). It has been on an extraordinary run since then, clocking a profit of Rs. 5562 cr in FY20 alone. The way Jio monetized its services was also interesting. It always said that the voice calls would be free and that you are essentially paying only for data consumption. This way it was using the strategy of giving bundled services with a tenure of upto 3 months (84 days) whereas the legacy carriers were still charging separately for voice and data.
This disruption was testified in a report which stated that, Data consumption in India increased from 2015-2019 at a CAGR of 93%, thus beating all leading economies of the world. This was made possible due to easy availability of internet. India consumes ~12-13 GB data per month per user. However, the penetration (mobile broadband) is still around 45%, thus leaving scope for more growth in future.
Along with the above initiatives that Jio implemented in a well-planned out manner, there were many macro factors as well that played out well & helped Jio to grow in a way that it has grown:
Availability of cheaper 4G smart phones: Chinese brands (Xiaomi, One Plus, etc.) penetrated into the India smartphone market with cheap 4G Volte smart phone that were fully compatible with Jio SIMs. This combination proved to be lethal in capturing Tier 2 and Tier 3 towns.
Government push for Digitization: Post demonetization, government started rolling out initiative to promote digital transactions. Offers were given on online payments, and merchants were on boarded for seamless operations. With the introduction of UPI payments, the whole payment landscape changed and Jio just provided the necessary infrastructure for this adoption.
The Real Plan – Jio Platforms
Drawing an analogy to a typical start up, Mr. Mukesh Ambani (Owner of Reliance and Jio) had the funds of a big private equity (through cash flows of his Oil & Gas business) and brain of a young start up entrepreneur. He identified that digital is the next big thing and he wanted to venture into this world. As everyone said, Data is the new oil, thus Reliance entered the Oil of the modern world.
However, as many pundits later realized, he did not venture into telecom to earn Rs. 140 from each customer (ARPU). He wanted the full digital landscape, where telecom was just an entry point. Jio has now forayed into Music, Entertainment, Home Solutions, News, among others. In IT industry there is a concept of horizontals and verticals. Horizontals represents the basic architecture and infra required to build verticals (industry segments). Thus, jio only entered telecom to make the infra ready to build its entire digital ecosystem on it. And his further acquisitions and entry to allied digital segments is just a testimony to this fact.
Marketing & Branding – Another Growth lever
Jio introduced various offers for its subs with catchy and local taglines. Ex: Monsoon offer, Happy New Year offer, Dhan Dhana Dhan offer, among others. Reliance is also the owner of Mumbai Indians – an IPL franchise. Every year when the IPL is played, lot of advertisements can be seed during the commercial breaks as well on the stadiums highlighting Jio’s popularity. Even many IPL teams had Jio as their sponsors.
During the launch of Jio, it gave up to 3-4 SIMs on a single Aadhar card, just to increase the subscriber base. And the process of on boarding any subs was also completed within hours rather than days. Also, it kept on extending the free trial plans by 3 months so that people get more and more habitual on using internet just to take them to a stage where there is no looking back and translate this habit into profits. Besides launching the voice and data services, Jio also launched a plethora of applications, such as Jio news, Jio Tv, etc. just to take more visual space in the subs mobile phones along with their minds and also increasing the data consumption per user.
The OTT/Social Media Digital Loop
Every year since its launch, Jio has garnered more strength due to more and more adoption of digital services. So much so that even the Netflix boss once said that Jio has played a huge role in the penetration of Netflix in India markets.
Every activity in the flowchart suggests how Jio has benefited with different kinds of digital services being offered at different point in a subscriber’s lifecycle. It all started with casual social media consumption, that translated to payments and necessary utility bills. This then changed to the adoption of binge watching as a concept and at last the emergence of WFH culture due to Covid-19.
This has been the story of Jio so far. What can be the growth drivers for Jio in the next 5-10 years?