Reliance jio 4 g data war in indian telecom space

Reliance Jio
4G Data War in Indian Telecom Space
Prepared by :
Arindam Bhattacharjee
MBA (1st year)
School of Management
NIT Rourkela

Contents
• Introduction
• Mr. Mukesh Ambani on Reliance Jio
• Need for 4G
• Telecom Sector Analysis
• Growth drivers of telecom sector
• Jio dials “D” for disruption
• How data war is being fought
• Future forecast
• Financial impact made by Jio
• SWOT Analysis
• Conclusion

Contd…
• On March 10, 1876, Alexander Graham Bell spoke into his device and
said to his assistant, “Mr. Watson, come here, I want to see you.”
• In doing so, Bell launched the telephone era with the first bi-
directional electronic transmission of the spoken word.

INTRODUCTI
ON :
SERVICES PROVIDED BY TELECOM SECTOR

Mr. Mukesh Ambani on Reliance Jio
Jio is a Tech, Not Telecom Company
In an interview with ET, Ambani said, “I have always believed that technology drives human
civilization’s endeavour and progress. So if you ask what is my obsession, it is technology. I
wish I was 30 years old today. The opportunity in front of us today is huge.”
He added that, “companies that had bet on mobile internet have created the largest value in the
last 10 years. So, Jio is not really a telecom company. It is a tech company.”

Need for 4G :
• Overall Device and Network Performance
Assuming you live in an area with decent LTE coverage,
you should immediately notice enhanced overall network
and device performance when connected to LTE.
• Streaming Media
As more and more consumers move their digital media
libraries to the cloud, the benefits of LTE will become
crystal clear.
• Sharing Your LTE Connection via Mobile Hotspot
• Videoconferencing over LTE
LTE makes smartphone videoconferencing actually work.
And work well. If you've ever tried to use a
videoconferencing client over an HSPA+ or slower
network, you know the experience is rarely a smooth
one.

Telecom Sector Scenario : Basics

Trend of Internet subscriber base

Market Share (subscription) Analysis
Bharati
23%
Vodafone
19%
Idea
15%
Reliance
Comm
11%
Tata
7%
Aircel
8%
Telenor
5%
BSNL
9%
Others
3%
SUBSCRIBER BASE (IN 2015)
Bharati
25%
Vodafone
20%
Idea
18%
BSNL
9%
Reliance
Comm
8%
Aircel
9%
Tata
5%
Telenor
5%
Others
1%
SUBSCRIBER BASE (IN 2016)

Overall Subscriber Base
429.7
621.3
846.3
951.3
898
933
987.3
1058.86
0
200
400
600
800
1000
1200
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
Subscribers(in millions)

Tele density (%)
37
52.7
70.9
78.7
73.3
75.2
78.7
83.36
0
10
20
30
40
50
60
70
80
90
Teledensity (%)

Gross revenue from telecom sector in India
1523.6 1579.8
1716.6
1954.4
2125.9
2338.2
1253.7 1217.9
0
500
1000
1500
2000
2500
INR (in billion)

Growth drivers of telecom sector
• Rising income
• Increasing income in rural market
• Increasing internet revenues
• Relaxed FDI norms
• Enhanced spectrum limit

Jio dials “D” for disruption
• Lifetime Free Calls
Mukesh Ambani, CMD of Reliance Industries has announced that voice calls on the Jio network
won’t be charged, not even while roaming. He said that customers can’t be charged both for voice
and data, and therefore, all voice calls will be totally free for Jio subscribers.
• Welcome Offer With Free Access Till The End Of The Year
• Cheap 4G Phones For The Masses
• Lower Monthly Costs
Looking at the monthly packs Jio is offering, the Rs 499 pack seems to be the one likely to
become most popular. We think so since it’s the most affordable plan that spans almost a full
month, and offers the entire bouquet to users. This plan comes with 4GB of 4G data, which suffice
for most subscribers who have Wi-Fi access at home or office.

Contd…
• Jio’s Premium Content, All For Free
Jio’s premium apps include JioBeats for music streaming and
downloads, JioOnDemand for movies, JioPlay for live TV, JioMags for
magazines, and JioXpressNews for news.
• No Blackout Days
Most existing telecom provides follow a system of blackout days, wherein
any of their free SMS packs and offers are disregarded on high-volume days
(such as on festivals, for example). Jio will not follow this practice, resulting
in more savings for its users and more headaches for the competition.

Contd…
• Affordable 4G Data Costs

How data war is being fought ?
Airtel: Airtel moved first in the market with heavy advertisement budget over
the 4G experience, at every level of ATL and BTL they made huge investment.
Jio Preview Offer: Jio took its first step by providing first hand 4G experience
to the employees and employee based referrals. They created buzz in the
market with a wonderful media coverage and seeping users for “word of
mouth”. No investment in advertisement so far.
Vodafone joins the war and choose the side of Airtel, starts to inject money in
advertising about its 4G experience, huge inflow for advertising and BTL
activities.
Jio launches bundled offering with LYF handsets ( establishes itself as a
leading VoLTE based 4G handsets). Gathers a new set of Beta testers and plant
more number of users for “word of mouth”. Only expenditure in BTL branding
of partner stores for LYF and Gio.

Contd…
• Visible difference between the 4G quality and experience spotted by users
and market starts comparison at open front tech bloggers, media houses join
the party. ( Maybe managed campaign or spontaneous reaction)
• Airtel become defensive and tries to change the game by talking about its
network quality and to in-cash trust factor of users over its network coverage.
Campaign launch of “Open network”, again a high dose of ATL marketing for
same.
• Vodafone again follows the step of Airtel, starts talking about its “network”,
they start talking about “voice” and “network”
• Jio takes next step by opening up preview offers with 4G handsets of
different brands like Samsung, LG, Videocon etc. (Please note even at this
point, Jio is not selling services but only distributing the experience for free
and planting more and more seeds with real data users who are equipped with
4G handsets)

Contd…
• Airtel/Vodafone/Idea slash their data pack prices up to 80% to save their
customer base (They are not focusing towards fresh acquisition at this time
but about saving their high ARPU customer base who is loyal to them but
may move out because of huge price difference as compared to Jio)
• These are the events which have taken place, till now Idea is not in picture
as direct opponent. Fight is between Jio and Airtel where Vodafone seems to
be looking at Airtel to know the rules of the fight.
• It shortens the sides, now there is only Jio Vs Airtel. Challenge with Airtel
is to save its customer base and challenge with Jio is to snatch the high
ARPU customers of Airtel and let the second ally of Airtel i.e. Vodafone
bleed by throwing them to third place.
• Till now it seems that Jio is moving in right direction and has kept its
priorities right. Airtel is confused and trying to change the rule of the game
from “4G” to “Network” which does not seem to work as Jio has made it
clear that war is being fought over “4G” and the junta has second that it is
about affordable 4G currently.

Future forecast
• At present, around 3/4th of the revenues of telcos operating in India are
generated from voice calls. For instance, Airtel's voice calls account for
71% of its total mobile services revenues for the June 2016 quarter, while,
for Idea, it was at 72%
• With its unlimited free calling offer, Jio is hitting the telcos where it hurts
most, the biggest threat being the possibility of customers migrating to Jio.
If operators match Jio's offers, it would make a significant dent on their
overall revenues & profit margins.
• If they bring down calls to near-zero, even that would result in major losses.
What's worse is that contribution of data revenues is still minuscule for the
telcos to make up for the loss in voice revenues.

Contd…
• Jio's strategy of offering free voice is an innovative way for enticing
consumers to upgrade to 4G phones. As Jio's focus will be to retain majority
of the subscribers when they commercially launch, first as a secondary SIM
and over time by offering better network as primary SIM.
• At present only 25% of mobile phone users have smart-phones & among
them only 10-15% are using 4G. Jio is not going to work on feature phones
& non-4G phones. Therefore, it will have to rely on fast adoption of 4G
phones, going forward.
• · Jio’s network is based on new Voice over LTE (VoLTE) technology & is
the first Indian operator to do so. Just like any new technology, there will be
hiccups initially, which could slower the churn of users. A lot will depend on
the overall customer experience provided by Jio.

Contd…
• One of the pillars Ambani expanded on was the Jio app ecosystem.
There’s a JioTV app, a JioCinema app, a Jio Music app, a personal
digital wallet & a Jio Magazine/Newspaper application to
contribute towards adding value & generating revenues
• ·Reliance Jio’s entry may force operators to bid aggressively in the
upcoming auction, especially Vodafone & Idea.
• ·Most analysts believe that R-Jio would need 75-80 million
subscribers with an average revenue per user (ARPU) of Rs.180 for
EBITDA break-even over the next 2-3 years; execution and
customer care being the key.
• It has late mover’s advantage.

Contd…
• As per CLSA (Credit Lyonnais Securities Asia) Jio’s plans are
competitive, in the near term, their acceptance constrained by limited
availability of 4G handsets and steep premium to current 3G
subscriber ARPUs.
• With fresh risks, CLSA lowered our FY17-18 Ebitda and earnings
estimates for Bharti Airtel and Idea Cellular by 2-19%.
• However, key for Jio will be subscriber retention beyond free offers.
In the new landscape, data capacity play Bharti Airtel and Reliance Jio
are better placed given the lead in spectrum and network.
• Retain Buy on Bharti Airtel (target price Rs 398 from Rs 440) and Sell
on Idea Cellular (target price Rs 79 from Rs 94).

SWOT Analysis
• Strengths : Low tariffs, very wide network and brand name
• Weakness : Operation of Mobile Number Portability Still not smooth,
Highly dependent upon data consumption
• Opportunity : Large scale availability of smart phones, Increasing
rate of data consumption, International market
• Threats : Saturated market, Highly competitive market, Changing
Government Policy, Rapid upgradation in Technology

Latest developments
• Apple CEO Tim Cook said Apple is partnering with Reliance Jio,
which is offering free usage of data for a year to purchasers of new
iPhones, to ensure "great iPhone performance" on their network.
• Citing Reliance Jio's roll-out of 4G coverage in India, Cook said his
company "couldn't be more excited" about the enormous investments
being made in high-speed telecom networks, even as he conceded that
Apple’s smartphone has "not done as well" in the country

Conclusion
• Reliance Jio has brought “MAGIC” in Indian telecom sector which
can be explained as follows :
• M: Multimedia at affordable price
• A: Annihilation of expensive tariff plans
• G: Growth in 4G handsets sector
• I: Internet made afordable
• C: Customer Satisfaction

Reliance jio 4 g data war in indian telecom space

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