Reliance Jio: Too little too soon? Not again!

Reliance Infocomm was India’s first telecom company to bet on data.

Few would remember that Reliance branded fist sized handsets had an application (the word was yet to be coined back then) called Reliance World. It had offered cricket, astrology and other similar update. Back then, most of the users were red button-green button users who preferred it for calls only, and that too as infrequently as possible due to the forbidding cost of Rs 16 for an incoming call. 

Reliance Industries was still under Dhirubhai’s regime back then in 1999 when he launched the Rs 500 per mobile scheme that made many people join the bandwagon. The company had bet on CDMA which was a popular technology in the US back then, but had since lost its lustre to its much popular twin, GSM. They hoped that people will take to ‘extra’ value-added services which CDMA can give, with good data speeds. 

The business went to Anil Ambani’s kitty after the demerger of Reliance Industries. It later became a dual technology player which is now fighting large debt with a fading brand status. 

Easy come, easy go

Why didn’t Reliance Infocomm’s quickly attained supremacy last? They had bet on data way too soon. And, on a technology which did not prove to be a winner.

This time around, Mukesh Ambani is not making a similar mistake. Soon is definitely not on his mind right now, after his plans to be the fastest ‘deepwater gas basin’ at Krishna Godavari backfired.  

Mukesh waited around five years after he bought the 4G licences in 2010. He had been slowly adding spectrum and voice services licencing to his kitty. Now, he has to launch his services this year according to the agreement of the licence. He fired his salvo at the AGM to shareholders. 

The much dreaded tariff war in data services in the telecoms industry might soon take off. He promised his shareholders that extremely fast data services with a monthly bill of around Rs 300 to Rs 500, only for data. Handsets which allow 4G will also come at around Rs 4,000 apiece.

Where does that leave the current offerings in the market at?

Incumbent telecom players like Bharti, Vodafone and Idea Ceullar are now offering 3G services with average speeds of around 2 mbps and can bill anywhere between Rs 250 to Rs 500 depending on usage. In comparison, 4G speeds would be around 5 mbps and more, and seems to offer billing around the same amounts, though the fineprint is yet to be read.

Good pricing, better pricing, even-better pricing Jio is also launching his services at a time when the data market is ripe, growing and showing good signs of swelling beyond its current size. Sadly, the pricing for services is still not as ripe. 

The challenge for Reliance Jio comes from three sides. His market will depend initially on pulling away subscribers who already used to high-speed data services, and would now like to try out 4G. The marketing and the pricing should be enticing enough to ensure customer migration especially when new connections come with a lot of checking and documentation.

They would require big bang pricing. 

Last time around, there was no regulation and hence Reliance Infocomm could offer handset binding them to the telecom service. Telecom regulator had long since crushed this practice. All they can do now is offer a bundled service attractive enough for the customer to stop them from migrating. Again, there is requirement of lower pricing. 

Lastly, the low-priced handset might not be a very good crow puller amongst urban users. Those who want high-speed data services as such users prefer high-end handsets with a lot of features from specified operating systems and app stores. 

Many Chinese as well as other foreign companies are already selling 4G handsets and come decently priced though they are not as low as Jio’s. If Jio is looking to capture the masses which are not used to data services, this handset might win.

However, this market comes with low usage combined with demand for low pricing again. 

Jio is already setting stage for low margins from this business, without even launching a tariff war. This is the state of affairs with the top three telcos as well. 

In this business however, the top three have an edge. They have been offering their 3G services for more than three years now. Jio is a newcomer and is yet to face many network challenges that the technology might throw up. During 3G launch, the top three too went through a rough patch for a year-and-a-half with angry complaints from annoyed users about patchy services. If the same is expected to happen yet again with Jio’s 4G launch, that would mean two years of similar troubles starting this December. 

That would make take this business’ gestation period to around seven years. Will it itch after that, or celebrate a breakeven? Let’s see.