Jio made a big splash in India, now what?

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Jio's predatory pricing meant that several incumbents could not survive the competitive intensity. (Getty Images)

Reliance Jio, India's newest and the country's only pure-play 4G service provider, recently completed five years of operations. The company has had a transformative impact on the industry in several ways.

Jio disrupted India's telecom ecosystem by launching free voice and cheap data plans making data accessible to people from all segments of society. As a result, the number of broadband users grew from just 192 million in September 2016, when it launched, to 792 million in June 2021. More significantly, the data consumption per user increased from 878.6 MB in December 2016 to 12.33 GB in March 2021. The company is now the largest Indian telco with more than 400 million subscribers.

The last five years have also led to a massive change in the industry landscape. From an average of 12 service providers in every circle (service area), the number of telcos has come down to three private service providers and one Government telco. Jio's predatory pricing meant that several incumbents, including Videocon, Tata Teleservices and Aircel, could not survive the competitive intensity.

One of the key highlights of its five-year journey is that it was able to acquire more than $19 billion as an investment in 2020 from several technology giants and investor funds, including Facebook, Google, KKR, Intel and Qualcomm, among several others.

Over the last few years, it has acquired stakes in several firms, including Radisys, Embibe, Den Networks, Hathway, Saavn and KaiOS.

What does the future hold for Reliance Jio? 

As Jio has transformed the market, it has also changed over the last five years. "While the company started its journey as a telco, it wants to be seen as a platform and a digital company. This will become apparent over the next five years," said Neil Shah, partner and vice president of research at Counterpoint Research. "I believe Jio will have more than 600 million subscribers over the next five years, and if one includes the internet of things (IoT) connections, the number could reach 750-800 million."

The company is also gung-ho about making a mark as a vendor in the global 5G market. Reliance Jio has developed its own 5G solution, which it plans to sell in the global market after deploying it in its own network in India. While media reports have mentioned that it is an open RAN solution, there is no confirmation from Jio. 

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The future is likely to see Jio play an active role in offering services like cloud coupled with connectivity for enterprises. This, combined with 5G-powered private networks, can be a massive opportunity for the company.

"Jio has already acquired a stake in content firms, like Network18 and Eros Now, which means that it is well-poised to enhance its engagement and touch points with the subscribers through several digital offerings. This is where its association with Google and Facebook will come into play," explained Shah.

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There is also a possibility of going beyond the Indian shores. Jio was recently in the news for being in the fray for the recent acquisition of T-Mobile Netherlands. While that didn't work out, it is a possibility, especially when one considers that the company is cash-rich. 

Not such a smooth sailing

Even as the future looks bright, the company is facing several challenges today. The key is its failure to grow the Average Revenue Per User (ARPU). Cheap data rates and bundling of devices, like Jio Phone, have helped the company acquire subscribers, but unfortunately, the high-value subscribers on rival networks have continued to ignore Jio.

While arch-rival Bharti Airtel has an ARPU of $1.96 (INR145), Jio's ARPU is $1.86 (INR138) as per the latest results. More importantly, Airtel has a much higher base (97%) of active subscribers when compared with Jio, which just had 77.9% active subscribers at the end of June 2021. All this doesn't bode well for the company.

"One of the key challenges [faced by Jio] is that it is trying to do too many things, which means that it would need to ensure some level of integration between different activities to actually benefit from data," said Shah.

Further, Airtel is slowly gaining lost market share and is trying to gain an edge in 5G and satellite connectivity. Airtel has a majority stake in OneWeb, which it plans to leverage to acquire subscribers in remote and difficult-to-reach areas from where the next wave of subscribers is likely to come. Airtel will be putting up a strong fight to capture the enterprise market as well.