Why data won't flow like oil, for Jio

Reliance Jio, fondly referred to as the world's largest start-up, is unmistakingly a colossus straddling the ethnic, class and religious divides of India. The massive project of Rs 1.5 lakh crore investment (and counting) that promises to change the way every Indian eats, shops and has fun, has already made India proud. The country, which stood 150th in broadband penetration, has now surged to the numero uno position, said chairman Mukesh Ambani in exultation. Jio customers consume nearly as much mobile data as the entire United States of America, and nearly 50% more mobile data than all of China.

How did Jio achieve this feat? It's simple. Just imagine if a private company or the government itself decides to make electricity free, the country can soon become the largest consumer of electricity in the world. It's a global phenomenon: everything sells when sold free of cost.

So the real test begins when 100 million customers – including this writer who is being plain lazy to start using the service despite having a Jio sim card – move to pay a monthly bill of Rs 303 starting April 1. This may not pinch the high-end customers, but given the average Arpu (average revenue per user) of Rs 150-190 in India, Jio's quickly garnered subscriber base could witness some churn, says India Ratings and Research. Praveena Sharma of DNA Money reported that Jio runs the risk of losing half of its current subscribers, given that most users in India are pre-paid with Arpu, still lower at Rs 100-130.

Bankers and investors are cautiously optimistic. Over the last six years, Jio's cost has been a drag on the parent's valuation. By 2019, Jio investments may cross Rs 2 lakh crore, around 40% of the total capital employed by Reliance Industries (RIL). Though the move to start charging customers has breathed fresh life into the RIL's stock, analysts are unwilling to alter their predictions. Motilal Oswal Securities expects Reliance Jio to report a loss of Rs 14,189.2 crore in 2017-18, and then, continue to post net losses till 2020-21. Jefferies claimed that Jio could pull RIL's profit down by 26% in 2017-18. It has estimated RIL's consolidated net profit in 2017-18, including Jio's accounts, at Rs 22,184.2 crore, 26% lower than the estimated annual profit of Rs 30,073.5 crore this financial year.

Another point is about the brain-numbing numbers. Ambani said Jio users consumed more than 1 billion GB of data on its 4G LTE, all-IP wireless broadband network. More than 3.3 crore GB a day. Of course, a significant portion of this data is consumed as video, probably movie or porn downloads. Jio claims to have carried nearly 5.5 crore hours of video daily, making it one of the largest mobile video networks globally. Will it really help India's digital push if young Indians spend hours downloading and forwarding videos and memes? As a user, I am already tired of watching forwarded videos, mostly old and repeated, or part of some virulent campaigns.

The disruptive entry of Jio has made rivals in the market run for a cover of consolidation. But will it help them restore the pricing power? In all likelihood, the fierce rivalry and rising capital expenditure will flummox the market further in 2017.