A disruptive debut

September 03, 2016 12:19 am | Updated November 17, 2021 04:45 am IST

That Mukesh Ambani’s >roll-out of fourth-generation telecommunication services through Reliance Jio would shake up the telecom market was anticipated. Still, the specifics of the ambitious pricing and customer acquisition plans unveiled at the Reliance Industries annual shareholders’ meeting were audacious. From making voice calls and domestic roaming completely free to offering 4G data connectivity at a fraction of the average market tariff, the latest entrant has, in one fell swoop, altered pricing dynamics in the sector for the foreseeable future. In the process, the company has also ended up putting the spotlight on data being at the core of mobile telephony services. With more than 90 per cent of almost 350 million Indians currently accessing the Internet on mobile devices, the availability, affordability and quality, in terms of browsing speeds, of the data service becomes critical. This is particularly pertinent as India makes more and more public goods and services accessible online. For a nation seeking to leverage the explosive growth in mobile telephony that has resulted in more than one billion subscriptions, the future lies in moving an increasingly larger share of economic activity across industries on to digital platforms. By setting out to provide its services at a significantly lower cost than most competitors, Reliance is attempting to alter the benchmark for consumer expectations on data quality. It seeks to make the proposition more sticky by bundling in mobile applications that will enable users to tap into a range of media.

How significantly the industry landscape is altered will ultimately depend on the reliability of the service that Reliance ends up providing. To be sure, the largest rival mobile phone operators have been quietly making their own preparations for Reliance’s entry and are certain to have factored in various strategic scenarios. As consumers opt to sample Reliance’s 4G services, it is inevitable that the competition will take a short-term knock on some operating parameters such as average revenue per user, average margin per user, subscriber churn, and data revenue growth. But the long-term health of the industry is unlikely to be seriously impaired as the size of the market in India is large enough to absorb one more player. Given the low operational costs of the business and the group’s overall capacity to raise capital at will, Mr. Ambani has the leeway to wait until Reliance Jio turns profitable. Fortunately, it is the consumer that stands to gain the most by this latest disruption.

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