Reliance Jio Case Study New
Reliance Jio Case Study New
Introduction
Throughout the world telecom sector is one of the prevalent sectors. Study stats that India would
be a speedily escalating hub for internet users, with market expected to be $9 billion by 2020
(Deloitte, 2017). Indian telecom sector is becoming backbone for fast growing Indian economic
of this decade. Jio came up in Indian telecom sector with a idea to make huge revenue by
providing quality service at a very cheaper rate. It came with advantage of first biggest 4G
network coverage across all 22 telecom circles in India (Jai Bhatia, 2016) According to
Paulasset, 2016 reliance jio is working according to Indian market; it gives best quality services
at much less price. Reliance Jio also giving challenge to more than 30 businesses because it also
enters in other service sector related to telecom sector.
1. Net Neutrality: Telecom Regulatory Authority of India (TRAI) banned differential pricing in
the country, thereby ending zero-rated and free data services such as Facebook Free Basics.
Thereby, no company can offer or discriminatory tariffs for data.
2. New Telecom Minister: Manoj Sinha took charge as the telecom minister replacing Ravi
Shankar Prasad.
3. GST Bill passed: In August, the GST bill was passed though there were many uncertainties
around the taxation rate, which would negatively influence its profitability. Through its revised
draft of GST on Nov 2016, the government provided additional tax credit for the telecom
companies. This is expected to go in tune with the Digital India initiative by the government and
a strong rural telecom infrastructure will play a critical role. Though GST is expected not to be
implemented before June 2017, we can expect to see some more changes.
4. Reliance Jio entry: Post the entry of Reliance Jio in to the mobile market, Jio has been
focusing on gaining quick subscribers. They have already made discounted plans (which have
disrupted the industry by making calling free) and easy access to SIMs by linking in to solely
Aadhaar. It has been quick to gain subscribers reaching quickly 50M by end of 2016 and
expected to double this by the end of Q1 2017. Though the subscribers that Reliance Jio has
gained initially are the low ARPU (average revenue per user) customers and most of the
customers are skewed to the low interest prepaid users, it has made quite a name for itself in the
country. Though complaints persist in terms of service quality and internet speeds, Jio seems to
be quickly fixing these issues and running towards the 100M subscriber mark. Though this will
make it the third biggest telecom player in the country within the next 2-month, only time will
tell about the profitability of this company. The industry has definitely taken a big hit in
profitability already and share prices of the big players have dropped significantly; it seems that
consolidation is a reality just waiting to unfold.
5. Spectrum auction: Government released 4G airwaves in the 700 MHz band among others for
auction and the government expected to raise about 5.6 lakh crore from the auction sales. 700
MHz lies at the spectrum sweet spot for 4G deployment (right balance between area covered and
penetration) thus making it very valuable to any telecom operator. The total auction proceeds to
the government was a mere 65K crore, when compared to the expectation of 4 lakh crore (from
700MHz alone at base price) and the main reason for the same was the huge debt that the
industry is already facing.
Telecom sector is witness lot of investments and developments due to daily increase subscriber
base. The industry has engrossed FDI worth US$ 23.92 billion from April 2000 to December
2016(Department of Industrial Policy and Promotion, 2017). Some of the key developments in
the recent past are:
Bharti Airtel will buy Telenor's India operations in seven circles to receive 43.5 megahertz
(MHz) spectrum in the 1800 MHz band.
Ortel Communications, Odisha’s largest multi-system operator, plans to invest around Rs
300 crore (US$ 45 million) over the next two years, for upgrading its infrastructure, along
with strengthening its reach, efficiency and competitiveness in the market.
Reliance Communications Limited (RCom) has signed a binding agreement with
Brookfield Infrastructure Partners to sell a 51 per cent stake in Reliance Infratel, RCom’s
tower unit, for Rs 11,000 crore (US$ 1.65 billion).
Private equity giant KKR & Co LP and pension giant Canada Pension Plan Investment
Board (CPPIB) are in talks to acquire a significant stake in Bharti Infratel, which is
expected at around US$ 4 billion.
Singapore Telecommunications Limited (Singtel), the major shareholder in Bharti Airtel,
announced that it has signed an agreement with its majority owner Temasek Holdings
Private Limited to purchase a 7.39 per cent stake in Bharti Telecom Limited, the parent
company of Bharti Airtel Limited, in a deal worth US$ 659.51 million.
Axiata Digital, a subsidiary of Malaysia’s largest telecom firm Axiata Group Berhad, has
made its entry into Indian e-commerce market by investing Rs 100 crores (US$ 15
million) in Bengalurubased StoreKing.
Government of India to make a windfall gain from sale of spectrum in 2016-17 and
achieve its fiscal deficit target of 3.5 per cent of GDP for the year.
Vodacom SA, a subsidiary of Vodafone Plc, has entered into an agreement with Tata
Communications Ltd to buy the fixed-line assets of TataComm's South African telecom
subsidiary Neotel Pty Ltd.
Reliance Communications Ltd, India’s fourth largest mobile services provider, has agreed
to acquire Sistema Shyam TeleServices Ltd (SSTL), the local unit of Russian company
Sistema JSFC, in a deal valued at Rs 4,500 crore (US$ 675 million), which includes
payments to the government for spectrum allotted to Sistema.
American Tower Corporation, a New York Stock Exchange-listed mobile infrastructure
firm, has acquired 51 per cent stake in telecom tower company Viom Networks in a deal
worth Rs 7,635 crore (US$ 1.14 billion).
Swedish telecom equipment maker Ericsson has announced the introduction of a new
radio system in the Indian market, which will provide the necessary infrastructure
required by mobile companies in order to provide Fifth-Generation (5G) services in
future.
Reliance Jio
Reliance Jio Infocomm Limited announced the launch of its digital services with JIO in
Mumbai on 1st September 2016 with Jio Welcome Offer. With the permission of
Telecom Regulatory Authority of India, users will have access to unlimited LTE data and
national voice, video, messaging services, Jio applications and content, free of cost up to
31 December 2016.
SWOT Analysis
Strengths
1. Reliance Industries is strong parent company backed up Mukesh Ambani.
2. Company has begun with 4G service with no tariff. It has strong financial capability to
stand with initial losses.
3. Strong brand image due to excellent marketing and advertising strategy
4. It has brand ambassadors like shahrukh Khan and Amitabh Bachchan who has deep
influence on masses.
5. It has technological advantages i.e. 4G LTE services with VoLTE.
6. It has built strong national nework with investment of around $20 billion.
7. Its network covers all the 22 circles across the India.
8. Jio apps are offering wide range of features like movies, shopping, chat, cloud, games
etc. under one umbrella.
9. Jio compact with affordable LYF smartphones would increase the brand.
Weaknesses
1. Advertisement showing PM picture would raise new controversies.
2. Mobile number portability is not very smooth and jio is expected large number of
customers would migrate from existing service providers.
3. Company has to depend upon data consumption for profitability due to making voice
calling free.
4. Jio made late entry would make difficult to increase market share.
5. Earlier company’s telecom venture CDMA was unsuccessful.
6. Company has inadequate fide optic capacity.
Opportunities
1. The company can offer telecom services at competitive rates.
2. India has huge market for telecom services because of large scale availability of smart
phones.
3. At international market company has huge opportunity in many developing countries.
4. Due to technological edge company can also promote exclusive services to
consumers.
5. Company reliance communication has a huge infrastructure over the country.
6. Lower data tariff plans may further attract advertisement industry with option of e-
marketing.
Threats
1. People would not like to use jio after free services are over.
2. The initial phase of rapid increase it is very difficult to maintain a large consumer base
to cross breakeven point.
3. Existing strong competitors having broader and loyal consumer base would tough to
compete
4. Indian telecom market is very competitive due to existing big players like Vodafone,
Idea etc.
5. Changing government policies would also create uncertainty in market.
6. Fast upgrading technology from 2G to 3G, 3G to 4G and next generation 5G
approaching shortly, needs huge investment plan to remain in market.