Wonderer's Lust

Jio really had no option

Many see Reliance Jio’s free voice plan as revolutionary and as some radical strategy.

The reality is Jio had no choice. They are a very late entrant to a mature market. Mobile phone and cheap mobile connections have been there since ages and there is very little scope to find new customers. Infact as of Sept 2015 there were nearly a billion mobile phone connections in India implying that many people had more than one connection.

Jio could have come up with the strategy of pricing its services at a discount to existing players. However the issue was existing players would have lowered their own tariff in a tariff war that would have ensured customers would choose from one of the players. With Jio having a smaller reach in terms of retail outlets they would have suffered. The whole industry would have taken a hit but Jio for the lack of sufficient customers would have made more losses per customers and would have bled it way to obscurity.

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We saw this same thing with Reliance when the lower call rates were matched by existing vendors( incoming was not free until Reliance made it free on its network. I still remember Hutch at 1 rupee incoming , 2.5 rupee outgoing in 2001). Aircel has always languished because its tariff were at a discount and for the premium postpaid customer (who also is worth 4-5 prepaid customers) simply did not see an upside. So did Uninor, Tata Docomo etc. ( I am ignoring CDMA aspects here)

Jio’s strategy to make all calls free is a master stroke because to match it, would mean that existing players would have to wipe out 70% plus of their topline. Internet still is being sold as a VAS( value added service). For Jio data is their service.  There is also the clutter from a 100 packs , recharges etc which will take ages to sort out for the existing player

Jio of course starts with a clean slate . Easy simple plans, no special tariffs( at least what it appears for now).

Their aim is simple- rapid customer acquisition.  That will help them make massive profits when the time comes.

Also some people asked, how will Jio make money. Jio will make lots of money. Their plans make that apparent but I will discuss it in my next post.

Disclosure : I have no conflict ofinterest with Jio or investments in telecom

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