Reliance Jio is here. Its entry into the Indian telecom space is at a time when M&As have already begun, operators are facing tough times, the pace of additions of new subscribers has slowed, and the industry is trying to make sense of new opportunities such as Internet of Things (IoT) and smart cities.
Jio’s entry also comes in the backdrop of the difficult transition to data from voice with expectations of telecom operators not being met and investments not yielding the expected returns. For the past three years, we have seen operators creating mobile data networks but the data revenue contribution is still under 30% and the majority still comes from voice streams.
Though a recent report by brokerage and investment group CLSA said that the Indian 3G and 4G subscriber base has tripled in the past two years to 120 million, ARPU (short for Average Revenue Per User a month) has not pushed up substantially. Even if there has been an increase in the data revenues for several operators in recent quarters, we are still talking about the blended APRU of less than $4.
A report said that the Indian 3G and 4G subscriber base has tripled in the past two years, but ARPU (Average Revenue Per User a month) has not pushed up substantially
Still, no matter how much data may seem like a futuristic strategy in the Indian context, there is a complete alignment in Jio’s investment-revenues plan, as compared to other operators. While the existing operators invested heavily all these years on the 30% contributing stream of data, Jio invests in an area which is 100% revenue stream for them.
For a while, may be around a year or so, Jio will be able to only ‘dent’ the data ARPU of other operators. With fewer number of interconnects and ports being made available, as per Jio, most early customers will keep two SIMs, one of the existing operator and another of Jio. The trigger for this primarily will be greed for data rather than voice calls no matter they are free.
But, in three to five years time, Jio will play a significant role in reshaping the ARPU composition in Indian telecom and it may speed up the national average equally accounted for by data and voice.
The existing telecom players in India did not take the over the top content (OTT) wave also in the right spirit. We all are aware of the debates and series of discussions around operators bleeding at the cost of OTT players. Jio has adopted a very well laid strategy: it is a telecom operator as well as an OTT player. It has created a complete ecosystem around 4G networks that addresses “What am I going to do with 4G?” inquisitiveness of an average subscriber. With the potential of subscribers available to Jio and the plethora of services it offers, the company has all it takes to become the country’s largest OTT player.
Jio has adopted a very well laid strategy: it is a telecom operator as well as an OTT player.
With this kind of approach, Jio has the ability of becoming the first converged operator of the country, thanks to IMS (IP Multimedia System) platform technology it uses for the provisioning and management of such services. The technology not only gives it an edge from effectiveness and efficiency point of view, but also eases out its management hassles, allowing it to offer at lower prices as operating expenses are comparatively lower.
This sets the ball rolling for an all-IP environment that we all have been reading and talking about for so many years now. The all IP environment exposure is very significant development for an average user of the data.
This will also help towards enabling IoT and we shall be seeing more and more devices hooked to this network whether in home, office or in public places. Many subscribers will understand and actually see many things taking the IP route — leading to what I refer to as AoIP (All over Internet Protocol).
This sets the ball rolling for an all-IP environment that we have been talking about for years.
While the pan India launch and presence of Jio can ably assist government in its ambitious programmes of Digital India, it also will make the implementation of smart cities easier to a great extent. Many of the devices like smartphones and symbolically TV, which were semi-online or completely offline, now will be connected and able to talk to other devices and networks and gradually we will see the infrastructure also getting embedded.
Jio services are definitely going to affect businesses beyond telecom. For instance, entertainment and broadcast industry, print magazine industry and several other such areas for which they have a service/app available. I expect DTH to get affected by this as well and so also the print magazines and its logistics and distribution system. For example, with JioMags, I could find almost any magazine – regional, national or international.
The way we consume data will also change. If I share my experience, since using Jio (under the free regime) I have found a lot of video content useful and compelling. So, digital assets and properties will have to deliberate on their video strategies to prepare for the expected change in the digital user/reader’s behaviour. We must soon start talking about viewers than readers in the analytics space. This is going to give a real fillip to e-education and e-health, to name a few.
On the enterprise side, there will be several organisations rethinking the mobility piece in the wake of Jio’s launch. However, a considerable disruption will only happen once RJio is considerably done with the fibre footprints. Initially, it will be primarily SOHOs and a bit bigger organisations which could shift the loyalty from existing operators, where the requirement is just a decent Internet service.
Another segment, again of national importance, going to see a boost with Jio services is the startup space. Startups need hassle-free communication services at affordable price points. In fact, like for students, Jio must offer special discounted packages for startups. This could be specifically for startups within incubators, for instance.
Faisal Kawoosa leads the Telecoms and SemiTronics (Semiconductor & Electronics) practices at CyberMedia Research (CMR).
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