Telecom: What could be Reliance Jio’s Entry Strategy?

After a long 5 year hiatus - between acquisition of Infotel Broadband services in 2010 & this day - Reliance Jio has successfully put its organization & network in place. The launch date of Reliance Jio services has been a matter of much speculation through. Grapevine has it that a launch, in June 2015, in 5 cities – Delhi, Mumbai, Ahmedabad, Nagpur & Lucknow - is likely; the buzz has now shifted on the likely "entry strategy".  

Aggressive Voice Tariffs: Should the entry strategy be voice based or data based?

While the last few years have seen a spurt in data usage, only about 15% of Telco revenues accrue from data today. The potential, to grow to at least 40% of revenues is indisputable  for countries like the US, Japan, UK & even some  telcos in SE Asia have already breached the fig.

India today sells about 80 million smartphones per annum & has a smartphone base of about 150 million. The TRAI figs. by end Feb 2015: 960 million mobile users: 81 million mobile broadband users: & over 250 million internet users. It can thus be inferred that 700 million consumers are predominant voice users & in a high telecom penetration scenario Reliance has no other option but to launch an aggressive voice plan to churn customers from existing operators & gain an impressive revenue market share (RMS). This suggested strategy is buttressed by historical evidence too.

Circa 2009, Tata DoCoMo’s successful launch was courtesy a 1 paisa per second voice plan which transformed the industry forever from a Pay Per minute (PPM) to a Pay per second (PPS) industry, sacrificing “Granularity”, which otherwise helped the industry gain an incremental 15-18% in revenues. While bloody “price wars” continued & prices dropped, further to 1paise per 2 seconds (30 Paisa per minute), it helped Tata gain a decent share.  

The TRAI notification of reducing the mobile terminating cost paid to 14 PPM from 20 PPM & eliminating the same, altogether, for landline calls gives further leeway to Reliance Jio since it shall hit the revenues of its competitors. Reliance launch plan could take advantage of this opportunity. Recommended voice plans: Pay Rs 49/- per month & make all calls at 15 paisa per min (1 paisa per 4 sec); or Pay 69 & get unlimited on net calls free (to quickly create a community) & other calls at 15PPM.

Else the strategy should be to launch "Voice Free" & charge only for data. Just as Tata disrupted the data market by launching 2G data at Rs 49/- per GB, Jio could launch a similar priced product for 4G.

For the over 250 million data users a VoLTE plan would be in order. As per a Credit Suisse report consumers could get VoLTE call at 24 PPM while a pure voice call on legacy networks is at 70 PPM. Expect Reliance to drop data rates to disrupt the VoLTE space too. Also expect a bundled device strategy to target High ARPU data users who would be offered the following additional services. 

Social Networking: The user base, in India, of Facebook – the largest social media app - is about 115 million while Whatsapp – the largest messenger app - is about 70 million. The rise in social media & messenger services has hit the sms revenues of all operators; telcos, therefore, have been demanding a revenue share from OTT (over the Top) players like Facebook, Whatsapp, Skype, Viber etc. Such a demand is, however, unlikely to be conceded, since the concept of “net neutrality” is gaining ground; consumer activism in India represented through 1 million e-mails sent to TRAI condemning “Airtel Zero” might preclude OTT players from agreeing for a "revenue share" now.

“When you can’t beat them, join them” is an old adage. Kavin Bharti Mittal – son of Airtel promoter, Sunil Mittal had launched a messenger service “HIKE” in 2012 which has succeeded in accumulating over 20 million customers. Reliance too has joined the bandwagon by launching “Jio Chat” in April 2015. Expect an interesting battle on messenger services in future. Surprisingly, other Indian telecom players are yet to make their moves in this space; they are content launching Whatsapp or a Facebook pack alone which does ensure data revenues but denies them the long term advantage of accumulating the additional wealth of consumer information that could have been profitably monetized. Are they missing the plot?

Gaming on demand: South Korea’s SK telecom in June 2014 has launched UHD (Ultra High Definition) “gaming on demand” & “video on demand” products” UHD offers 4 times the clarity of traditional HD viewing. Unlike the current system, customers can install games directly into their smartphones or PCs & enjoy games using their smartphones by receiving real-time playing screen from the cloud server while the real game is being played. Expect Reliance to replicate the same.

Video streaming of sports & movies: Jio recently gave customers at Wankhede stadium a free experience of 4G in a game involving the IPL team “Mumbai Indians” – owned too, by the group. On entering the stadium, customers were prompted to give their name & mobile no, followed by which they received a verification code to log in. The company shall provide the same facility for all the 7 matches involving Mumbai Indians at the same stadium. The stadium has a capacity of 33500 which means by the end of this exercise, Jio would have not only tested load on its network but also secured data on over 2 lakh cricket crazy fans of Mumbai to be specifically targeted, later, with relevant content & services.

Jio has been ceaselessly working on strengthening its content portfolio. It bought Network 18 which owns Eenadu (all channels except Eenadu Telugu), CNBC TV18, CNN IBN, Colours etc. The company plans to launch “Jio Play” an app that shall stream all TV channels & also provide latent recording of 7 days. A "finance app" is also planned which perhaps shall leverage the synergies with CNBC TV 18 & Awaz.

The principle of live streaming can be extended further to include musical shows, events, sports, arti’s or sevas at places of worship which would be a good revenue spinner. Subscription based services like Music on demand (MoD) or Video on Demand (VOD) would also be deployed. Would this kill pure play DTH players? Likely. If reliance procures a MSO license & uses its fibre network to offer cable services it shall disrupt both the cable & DTH industries.

Plans to reduce “Digital Divide”: SK telecom had launched a year-long tour that includes world’s first “Virtual Reality Museum”- developed in partnership with National Museum of Korea – with the tour stopped at 20 locations in total, to bridge Korea’s digital divide through hands-on experience. Reliance should launch something similar.

The Dhirubhai Ambani International School, which provides education from LKG to Std. 12^th, must have over the years developed content & pedagogy which can be used to connect schools across the country - through a “digital school project” running on a Jio backbone - under a franchisee model. Going forward, it can potentially be dovetailed into the “skill India" project thereby creating a revenue stream under the “education” vertical.

The HN Reliance Foundation & Research centre’s expertise should be the backbone to build on the “Mobile health” strategies of the company.  Launching a mobile "Health app" could be the first step.

M2M (Machine-to-Machine) communications or Internet Of Things (IOT): The ubiquitous use of smart devices in every sector - health, energy, automotive, manufacturing, logistics etc.- is a discerning trend.  Consumers shall have the luxury of remotely switching on/off the A/C, microwave ovens etc. or keep a live watch of a child left in the care of nannies at home.  There are many exciting possibilities & it will be interesting to see if Reliance can imaginatively combine its assets in “reliance digital” stores with its M2M initiatives to get premium customers. Child protection devices like AT&T’s FiLiP can also be sold from these stores.

While it is technically possible through M2M for a farmer to remotely handle pump-sets for optimum water usage or maintain the parameters in eel rearing farms, such an initiative might not attract immediate traction in India; a rural push is therefore some time away.

Location based services: Over time Reliance Jio with huge customers acquisitions would be sitting on a wealth of data. It can then analyse mobile travel patterns & the consumption trajectories of individuals to offer location based relevant content & services. Advertisers would find “Mobile advertising”- that helps target a specific individual – a far attractive proposition as compared to the “shotgun” approach of TV advertising.

With close to a billion mobile users, the Indian mobile payments market has much untapped potential. The recent 25% stake acquisition by Alibaba’s Jack Ma in Paytm heralds such a possibility. Reliance should launch its own Payment gateway so that customers attracted  to retail areas through “mobile advertising” would be make to pay using its “cashless” mobile wallet thereby gaining another revenue stream. Just as Alibaba deploys AliPay, Jio can similarly use its own mobile wallet for making payments for goods bought on its e-commerce venture. Over time this opens up the possibility of applying for a banking licence too.

Apps: Reliance should initiate “youth connect” through conduct of “appathons” in colleges. The best apps selected need to be marketed in a "revenue share" format, thereby encouraging "crowdsourcing". Encouraging employees to create apps with promising ideas to be funded in a “start-up mode” shall yield good dividends; this model is successfully deployed in AT&T.

1.      Convert Phone 2 a Microphone: AT&T has developed an app that will let people use their Android and iPhone smartphones connected via a Wi-Fi or cellular data connection to a laptop, which when plugged into a speaker system, can convert the phone turns into a microphone. The app could be used by conference organizers, educational institutions, or hotels that host events, office holiday parties or Karaoke parties. It completely eliminates the need for a wireless speaker systems

2.      Troubleshooting: AT&T's engineers in Israel have worked closely with the company's Digital Care team to develop a new app to be used by home broadband users on their smartphones that will let them take a picture and instantly share it with a technician to seek help regarding troubleshooting network setups. Instead of technicians, blindly, trying to figure out whether cables are even hooked to the right ports, they'll now be able to see the setup. The technicians will also be able to send back pictures and diagrams through the app, which will show customers how they can fix their problems. This ensures quick troubleshooting – enhancing experience - & eliminates a technician visit – reducing costs.

The other strategies that jio could tap on are elaborated in my article whose link follows.

http://meetrk.blogspot.in/2015/04/telecom-what-should-telcos-do.html

Conclusion

Reliance in its first telecom entry made a splash through the “Monsoon Hungama” offer in 2003. Both critics as well as admirers are waiting to see if a similar magic shall be replicated once gain. With Mukesh Ambani at the helm, don’t rule out the magic.