Reliance Jio: Disrupting the Indian Telecom Industry
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Case Code: BSTR519 Case Length: 15 Pages Period: 2016-2017 Pub Date: 2017 Teaching Note: Available |
Price: Rs.500 Organization : Reliance Industries Limited Industry :Telecommunications Countries : India Themes: Business Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Telecommunication Sector in India
The Department of Telecommunications (DoT) was set up by the Government of India (GoI) in the 1980s. Its function was to manage all telecommunication services within the country. In 1986, the GoI sought to modernize the telecommunications facilities in the country and it established Mahanagar Telephone Nigam Limited (MTNL) to look after services in Mumbai and New Delhi, and Videsh Sanchar Nigam Limited (VSNL) to handle overseas services. The rest of the nation’s services were to be run by the DoT. In 1994, India ranked sixth in the world in terms of number of installed fixed lines. The GoI introduced the National Telecom Policy (NTP) in 1994 to improve India’s position in global telecommunications. The introduction of the NTP led to a metamorphosis of the industry as it allowed the private sector to invest in telecommunications...
Jio Enters the Indian Telecom Market
Reportedly, Jio’s launch had been in the making for about six years. Jio was established based on Ambani’s belief that mobile internet was the revolutionary technology of the 21st century. Ambani re-entered the telecom sector by acquiring a company that had bought a pan-India 4G spectrum in the 2300 MHz band in 2010. In 2010, RIL entered the broadband services market with the acquisition of Infotel Broadband Services Limited (Infotel), which was the only successful bidder for the pan-India fourth-generation (4G) spectrum auction held by the Government of India. RIL had paid Rs. 48 billion to Infotel to pick up 95% of its stake. Infotel had its name changed to Reliance Jio Infocomm Limited (RJIL) in January 2013...
Jio - A Game Changer
Access to the Jio service was facilitated from September 5, 2016. Jio had introduced Aadhaar -based digital Jio SIM activation across 3,100 cities and towns in India. This allowed the customer to complete the SIM activation procedure within minutes using his/her Aadhaar number. Reportedly, people across cities in India waited in serpentine queues to buy an RJio SIM card. Application forms which were supposed to be free were reportedly sold in the black market for Rs.100 each. Jio even started home delivery of Jio SIMs in December 2016. One could register to get a Jio SIM home-delivered and it could be activated within 5 minutes through eKYC. This service was active in 8 cities of India – Mumbai, Delhi (NCR), Kolkata, Chennai, Bangalore, Hyderabad, Pune, and Ahmedabad...
Competitive Pricing
Jio, which disrupted the Indian telecom market with its six-month-long free data services, started charging customers from April 1, 2017. Ambani announced Jio’s tariff plans in February 2017, including the special Jio Prime membership and the “Everyday More-Value” offer. The Jio Prime membership offered 1 GB high-speed 4G data and free calls for Rs. 10 a day for a year. The membership fee for Jio Prime was Rs. 99 per year. The unlimited free voice, free data offered in the ‘Happy New Year’ scheme would be available to Jio Prime members till March 31, 2018, at an introductory price of Rs. 303 per month. Jio Prime members would also be able to enjoy all Jio’s applications worth over Rs. 10,000 absolutely free till March 31, 2018. Jio in addition to its own tariff plans, also came up with the ‘Everyday More-Value’ offer in March 2017 under which its customers had the option to choose a Jio plan that matched the highest selling tariff plan of any of the other leading Indian telecom operators and would get 20% more data than other operator offered...
Marketing
RIL had aggressively promoted Jio even before its launch by promising free data and voice calls. About fifty customer acquisition and relationship managers were appointed to hire teams that would target signing up users. The launch of Jio was a massive event attended by a who’s who from politics, Bollywood , and Indian and international media to ensure that the offer reached out to the maximum number of people with multi-channel coverage...
Results
According to industry observers, Jio was the fastest growing company in the world and had crossed 50 million subscribers in a record 83 days. Airtel had reached the same milestone in 12 years, while Vodafone and Idea had taken 13 years each. According to sources, Jio acquired 1,000 customers per minute (since September 5 2016) and 6 lakh per day...
Challenges
Analysts opined that Jio had been a totally disruptive force in the Indian telecom sector. It had forced competitors like Airtel, Idea, and Vodafone to experiment with different packages and data pricing strategies in order to battle its disruptive pricing. Vodafone was in talks for a merger with Idea to battle Jio’s sales. Analysts projected that Jio’s arrival would generate a trend of consolidation in the telecom sector. Airtel had slashed its 4G/3G data by nearly 80% and for corporate customers it had reduced the prices by up to 60%. Airtel also launched a new data plan “myPlan Infinity’ that allowed consumers to make voice calls for free. Idea slashed data tariffs by up to 67%. Airtel entered into a definitive agreement with Norwegian telecom operator Telenor Group (Telenor) on February 23, 2017. As a result of the acquisition, Airtel would take over Telenor India’s spectrum, licenses and operations, including its employees and customer base of 44 million. Analysts felt that with this move Airtel intended to defend itself against Jio’s sales...
The Road Ahead
In February 2017, Jio announced a strategic partnership with Uber Technologies Inc. (Uber) aimed at bringing the benefits of Jio Digital Life ecosystem to their users. The agreement would allow Uber riders to pay for their rides using JioMoney and thereby enhance the digital transaction ecosystem in India. Anirban S Mukherjee, business head, JioMoney, said, “Jio aims to bring the benefits of evolving digital technologies to every Indian through an entire ecosystem that will allow Indians to live Digital Life to the fullest. JioMoney’s integration with Uber will power the rapid migration of many more Uber transactions to the digital platform.” Jio was reportedly gearing up to expand the company’s product portfolio by venturing into diverse areas such as broadband services and Direct-to-Home (DTH) TV services. It was expected to launch DTH services, which planned to offer more than 350 channels...
Exhibits
Exhibit I: Reliance Industries Limited Businesses
Exhibit II: Growth of Internet Users in India (2008 to 2015) (Millions)
Exhibit III: Market Share of Wireless Service providers in India (As of March 2016)
Exhibit IV: Jio Apps*
Exhibit V: Jio Happy New Year offer
Exhibit VI: Mobile Data Traffic Share as on February 1, 2017
Exhibit VII: Download Speed Test of Jio
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