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  1. Mukesh Ambani’s Reliance Jio Phone is not about the handset; data usage is at play

Mukesh Ambani’s Reliance Jio Phone is not about the handset; data usage is at play

After disrupting the voice and data telephony services in India with its near unlimited offerings at dirt cheap tariffs, Mukesh Ambani sought to replicate the success of its affordable pricing model with the launch of a low-cost, ‘intelligent’, 4G-enabled Jio Phone handset.

By: | Published: July 21, 2017 12:53 PM
Reliance Industries will distribute Jio Phone to its users for a refundable deposit of Rs 1,500 and no upfront cost.

After disrupting the voice and data telephony services in India with its near unlimited offerings at dirt cheap tariffs, Mukesh Ambani sought to replicate the success of its affordable pricing model with the launch of a low-cost, ‘intelligent’, 4G-enabled Jio Phone handset, which it would distribute to its users for a refundable deposit of Rs 1,500 and no upfront cost. With Jio Phone, Reliance Jio, whose services are limited to 4G-enabled phone handsets given its VOLTE-based network, hopes to rapidly expand its footprint further, even as its earlier service offerings have already taken the Indian industry by storm.

At Reliance Industries’ 40th AGM on July 21, reiterating his belief that data is the new oxygen, Mukesh Ambani said that Reliance Jio is committing to end digital starvation and disempowerment through a three-pronged approach: enhancing connectivity, data affordability, device affordability. To this end, the new phone handset will help Reliance Jio propagate the data usage among a much wider user base.

While the security deposit of Rs 1,500 will be refundable after a period of three years, it is annuity payments for the use of data that Reliance Jio seems to be betting on for the company’s future revenue growth. Reliance Jio Phone users will be offered voice and data services for tariffs plans starting at Rs 153. Mukesh Ambani said that the voice services on Jio Phone handsets, while there will be unlimited data plans as well.

The business model — that of giving away the handset for almost free in the hope of earning a monthly fee from the usage of the services on it — is not something entirely new. This is similar to the service model followed by most operators in the developed markets such as the US, where the telecom operator sells phone handsets at highly subsidised prices, bundled with a monthly tariff plan offering voice and data services.

With the new phone launch, Reliance Jio seems to be eyeing a much wider market of 500-600 million users, who so far use only feature phones without the benefit of 4G or even 3G data for want of affordability. With the phone handsets rolling out for virtually free for them, Reliance Jio is eyeing the cash flow of Rs 153 or more from the 100s of millions of users who are likely to make a switch to the company’s latest offering, as a large part of that user base in any case pays above Rs 150-200 per month for telephony services.

Reliance Jio has grown at a breakneck speed since the official rollout of services on 5 September 2016. It crossed 50 million subscribers in just 83 days, and 100 million in 170 days, adding at an average rate of six lakh subscribers per day. Mukesh Ambani said today that Reliance Industries now has over a 100 million paying customers on its network.

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