How Google stands to gain from Reliance Jio

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Published: July 19, 2020 8:00 AM

The gain for Jio is that once the affordable smartphone is ready and commercially launched, the low-paying JioPhone users can migrate to it and enhance its average revenue per user (Arpu).

Google already has Google Pay, and once WhatsApp gets into this business, there would be major competition between the two.

The Reliance Jio-Google collaboration is not only beneficial for the Indian company by enabling it to on-board the nearly 350 million 2G subscribers to its 4G network fold, the deal, for which Google is investing Rs 33,737 crore into the Jio Platforms for a 7.77% stake, will also lead to big gains for the tech giant.

As is known, as part of the tie-up Jio will manufacture affordable, entry-level 4G smartphones. Since Google would be developing the software for these affordable smartphones, it stands to gain revenue-wise, as 2G users moving to 4G will buy several apps and updates from its Playstore over a period of time. The payment for buying apps and their updates are directly made by the consumers to companies like Google. This broadening of the revenue base will be a big gain for Google, analysts maintain.

The other major gain for the tech major would be that it can effectively compete and protect its turf in the app domain at a time when Facebook has also tied up with Jio and would use the opportunity to enhance its apps.  For instance, Facebook’s arm WhatsApp is in the process of getting into the payments business and wants to scale this big time in India. Google already has Google Pay, and once WhatsApp gets into this business, there would be major competition between the two. This competition is going to be challenging since WhatsApp has tied up with Jio Mart, which is an e-commerce venture that brings neighbourhood grocery stores into its fold. If consumers buy from Jio Mart using a WhatsApp button, chances of using WhatsApp pay would be higher. Since Reliance Retail has plans to broaden Jio Mart by getting into other consumer segments also, the WhatsApp payment business has the potential of a huge leg-up with time. It is here that Google needs to protect its turf.

The challenge would exist for Jio too to balance the interests of these two tech majors, as there is hardly any precedent of the two being present under the same corporate fold before this. The gain for Jio is that once the affordable smartphone is ready and commercially launched, the low-paying JioPhone users can migrate to it and enhance its average revenue per user (Arpu). Way back in 2018, Jio had launched the low-end JioPhone aimed at low-paying subscribers who could not afford smartphones. Though JioPhone is a 4G phone, it does not have features like downloading apps, etc, so apps like Facebook or WhatsApp need to be built into them at the manufacturing stage itself. The consumers using these phones barely use such apps, which is why Arpu and data usage do not see a surge. There are around 100 million JioPhone users.

Though Jio has a higher subscriber base than Bharti Airtel, if one looks at the January-March numbers, its Arpu at Rs 131 was much lower than Bharti’s Rs 154. Even the data usage per customer of Bharti was higher at 14 GB a month compared to Jio’s 11 GB. With the Google smartphone, this trend can be reversed.

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