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5 Reasons Why The RJio Threat Is Overstated

It is probably the most anticipated launch in the recent times. Mukesh Ambani led Reliance Jio is planning to launch 4G services in 2015. There is a strong anticipation in the industry that this would be disruptive and will adversely affect the incumbents like Bharti Airtel, Idea Cellular, Vodafone India and Reliance Communications.

A key reason for this anticipation is that Mukesh Ambani’s earlier telecom venture Reliance Infocomm changed the entire landscape of the industry for many years to come, after it unveiled a historic Monsoon Hungama that allowed a subscriber to get mobile phone with a connection by paying just Rs 501. Under the scheme, the customer could choose from three monthly plan options: Budget 149, Budget 249 and Dhirubhai Ambani Pioneer Offer (DAPO). The scheme was a huge success and led to a dramatic drop in the tariffs. About half a million subscribers joined the scheme in the very first week of the launch. It has often been said that Reliance Infocomm’s launch on December 28, 2002 played in key role in making connectivity affordable for the masses.

At the time, the scale of the launch was unprecedented. Reliance Infocomm had laid down 60,000 km of optic fiber network covering around 600 cities. “The architecture and functionality of this network is dynamic to keep pace with the evolution of technology in the future,” Mukesh Ambani had said at the time of the launch. He had planned to eventually extend the fiber network to cover 116,000 km to connect 2,500 towns and cities of the country. It is in this background that the re-entry of Mukesh Ambani in the telecom industry is nothing short of a nightmare for the incumbent telcos.

From all accounts, the scale of things seems to be grander this time around. Reliance Jio Infocomm will be launching a network that would cover 5,000 towns and 2.5 lakh villages in the initial phase in 2015, thus accounting for over 90 percent of urban India footprint. Eventually the network would encompass all of India’s 600,000 villages, as per the annual report of Reliance Industries. The company plans to invest Rs 70,000 crore in the venture.

Here’s a comparison of Reliance Jio with existing incumbents on various parameters:

1. Spectrum: Reliance Jio acquired 78.8 MHz of spectrum in the 1800 MHz frequency band in the recently concluded auctions. It also has pan-India spectrum in 2300 MHz frequency band. So, clearly it has enough spectrum for a very long time. But the significant aspect is that most of the incumbent telcos are in equally strong position where spectrum is concerned. Bharti had also acquired 115.0 MHz spectrum in February this year in 1800 MHz frequency band. The company would be using this to launch FDD-based LTE services. “The Company plans to roll out high speed 4G networks in various circles using FD-LTE technology in the 1800 MHz band besides its existing TD-LTE roll-out in the 2300 MHz band, giving it a pan-India 4G footprint,” said the press release issued by the company after the February auctions. (See: RJio Spectrum Position No Longer Unmatched.) Similarly, Vodafone India and Idea have acquired spectrums, which they would be using to launch services.

2. Infrastructure: Being a greenfield telco, Reliance Jio has very little infrastructure of its own. The company has adopted the smart strategy of sharing infrastructure from various players in the telecom ecosystem. It has finalized infrastructure sharing agreements with Viom Networks, Bharti Airtel, Reliance Communications, BSNL, Ascend and Tower Vision. RJio is also in the process of laying its own fiber through its partner HFCL in some parts of the country. The company also started offering Wi-Fi in some parts in the state of Gujarat. However, the incumbents are well placed with a huge subscriber base across various technologies (like 2G, 3G) and enjoy strong brand equities. Reliance would need to build its distributor chain from the very start.

On the other hand, the incumbents have a lot of legacy equipment, which could be a weakness and might not be able to match the performance of the latest equipment. Reliance Jio has no such issue. The company would be getting the best and the latest equipment for the launch of services in the coming year. While the incumbent telcos are burdened by network upgradation projects to meet the data tsunami, RJio’s equipment would be freshly minted, thus enabling it to ride the wave.  

3. Content: This is probably going to be the key differentiating factor of Reliance Jio, especially with the recent acquisition of the Network18 Group. The incumbents are focusing on the network expansion and upgradation but most of them are not really focusing on the content that they are offering to their subscribers. RJio is thinking of offering a subscriber a valid reason to move to their network and it is here that the acquisition of Network18 Group might play a significant role. Getting free content on a network that actually provides good speed might be its biggest differentiating factor.

4. Quality Of Service: If past experience is anything to go by, 3G didn’t set the market on fire even after the tariff drop. So, if Reliance Jio is banking just on aggressive tariffs then that might not be sustainable. After all, raising the ARPU is a fundamental basis for the success of any telco business. However, the quality of service itself can be a differentiating factor since most of the telcos are struggling with providing good quality consistent and seamless network.

5. And The Good Old Voice?: A critical factor for Reliance is that it might find difficult to offer voice in 4G network. Though voice revenue is coming down, it is by no means anywhere near its end. Of course, here the incumbents have an advantage over RJio but Mukesh Ambani might have a trick or two up his sleeves. Since the time of Mukesh Ambani’s re-entry in the telecom space, speculation has been rife that he might either take over his brother Anil Ambani’s Reliance Communication or tie-up with it to offer voice. And soon enough, the brothers came together to sign an infrastructure-sharing agreement. Now the speculation is rife again that RJio might utilize RCom’s infrastructure to offer voice. It remains to be seen how Mukesh Ambani will take care of this problem but VoLTE (Voice Over LTE) is clearly not mature enough to offer voice services. So, the next best alternative could be to take a collaboration route. 

—Gagandeep Sodhi, Editor, Light Reading India

Read more at: http://www.lightreading.in/lightreadingindia/special-feature/296793/reasons-rjio-threat-overstated?utm_source=referrence_article

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