How Reliance Jio Platforms became India’s biggest telecom network

Months after India’s richest man launched his telecom network, his chief rival, Sunil Mittal, was already struggling to contain his frustration in the public.

That tycoon Mukesh Ambani would try to win subscribers by offering them voice calls for free wasn’t a surprise for anyone, said Mittal at the World Economic Forum in January 2017.

But making voice calls and bulk of 4G mobile data completely free for seven months clearly “meant that they have not gotten the attention they wanted,” he said as he felt hopeful the local regulator would soon intervene.

This wasn’t the first time Ambani and Mittal were at crossroads. In 2002, Ambani had launched a telecommunications company and sought to win the market by bandying out free handsets.

In India, carrier lock-in is not popular as people prefer to pay for small sachets of voice and data plans as they use them. But lucky for Mittal, Ambani’s journey was cut short — more of which you can read here.

But this time Ambani had spent more than six years to work out his re-entry to the telecommunications market and he had all the money in the world to fight.

Three and a half years later, Reliance Jio Platforms, Ambani’s telecom network, has captured more than just the attention.

In the past nine weeks at the height of a global pandemic, Ambani has secured more than $13.5 billion by selling about 22% stake in his telecom company to, among others, Facebook and private equity firms Silver Lake and General Atlantic.

Jio Platforms, a subsidiary of Ambani’s oil-to-retail giant Reliance Industries (India’s most valued firm), is in advanced stages of talks to sell an additional 8% stake over the course of next few weeks. Local media reports claim that Microsoft alone could deliver a $2 billion check to Jio Platforms.

Jio’s frenzy investments in recent weeks are just as impressive as how quickly it attained the top spot in an industry that has seen over two dozen firms try their hand in the past 25 years.

At their peak, Vodafone Idea and Bharti Airtel had established a duopoly and courted more than 650 million users. But like every other player in the industry, the joint venture between British giant Vodafone and Indian tycoon Kumar Mangalam Birla’s Aditya Birla Group and Mittal’s Airtel have shed tens of millions of users in recent years.

While Jio Platforms has yet to hit the 400 million subscribers mark, today it is the clear leader with 388 million subscribers, ahead of Vodafone Idea and Airtel, both of which have about 300 million customers each.

“In India, telecom operators make most of their money through voice calls. Jio was launched with free voice calls and bulk of 4G data at no cost for a protracted period that immediately made it the favorites,” said Jayanth Kolla, an analyst at research firm Convergence Catalyst, of Ambani’s strategy.

The free period, which began in early September 2016, was supposed to last until the end of the year, but Ambani later extended it to April. It only took him 170 days to gain 100 million subscribers — the fastest for any company globally to reach this milestone.

Airtel, Vodafone Idea, and state-run operator BSNL completely missed the boat — despite knowing that India’s richest man was preparing to launch a competing service, said Mahesh Uppal, director of communications consultancy firm Com First.

“Existing players in other markets expect the newcomer to compete aggressively on price. So they often lower their prices – sometimes steeply — to reduce the latter’s attractiveness. Newcomers often complain to the regulators about anti-competitive practices of incumbents. In India, the opposite happened. It was the existing players who ran to regulators with complaints,” he said.

Despite Jio’s gain, official data from companies — and corroborated by the local regulator — shows that Airtel and Vodafone Idea did not start to lose subscribers until September 2018.

In India, the vast majority of smartphones ship with the ability to simultaneously handle two phone numbers (SIM cards). Reliance Jio (technically Reliance Jio Infocomm, which is the subsidiary of Reliance Jio Platforms) quickly became the second phone number for millions of Indians — the one they used for data consumptions and voice calls.

One of the most remarkable things Jio has been able to pull off in its journey is retaining customers when the free days finally got over. But until late last year, when the entire industry collectively raised mobile tariffs, Reliance Jio kept its data plans cheap. Its cheapest plan cost less than $2 and delivered unlimited voice calls and a gigabyte of data for each day.

Convergence Catalyst’s Kolla said Jio was able to retain customers in part because of its digital offerings. Jio operates a suite of apps including JioTV, which streams more than 500 channels, JioSaavn, an ad-supported music streaming service, and on-demand movies and TV shows streaming service JioCinema. All of these services are available to Jio subscribers at no additional charge.

Some of these services have already amassed tens of millions of users. JioSaavn had 23 million weekly active users last month, according to one of the top mobile insights firms — whose data was shared by an industry executive. MyJio, an app that bundles many of these services, have 80 million weekly active users.

“Ambani used his telecom network to make inroads in the digital ecosystem — something, which until then was dominated by Silicon Valley firms. Jio’s competitors did not invest much in creating their own digital services because it did not make much financial sense for them,” said Kolla.

This strategy is also evident in the way Ambani is leveraging his telecom network to boost his other businesses. Last year, he announced a JioMart, a joint venture between Reliance Jio Platforms and Reliance Retail, the largest retail chain in the country with presence in more than 700 cities.

Facebook chief executive Mark Zuckerberg said as part of his company’s $5.7 billion investment in Jio Platforms, the company will collaborate with JioMart to empower tens of millions of neighborhood stores and merchants in India. A week later, JioMart began testing WhatsApp to let users quickly place orders and track their shipment on the messaging service. In the weeks since, JioMart has expanded to more than 200 cities and towns in India.

[Also read: Extra Crunch’s interview with Facebook India head Ajit Mohan on the $5.7 billion investment in Jio.]

Before Reliance Jio entered the market, Airtel and Vodafone charged users about $2 for 1GB of 3G data alone. The aggressive growth of Jio, which from day one has only supported 4G, forced them to eventually slash their mobile tariffs by as much as 80%.

But while they were adjusting to better fight on pricing, Jio had moved on to its next act. In a year since its launch, the company had inked deals with more than 20 smartphone vendors that included all the big brands such as Apple, Samsung, and Xiaomi to bundle its SIM card with their smartphones.

Soon afterwards, Jio launched its “smart feature phone” called JioPhone that supported 4G. JioPhone, which was available to customers for $2.4 a month, immediately gained foothold in small towns and villages where the penetration of smartphones and internet is low.

The company claims that it has sold more than 30 million JioPhone units to date. “Getting millions of people access to the internet was always their strategy. JioPhone enabled them to reach users who could not otherwise afford a smartphone and access its digital suite of services,” said Kolla.