As the war between Reliance Jio and the big three incumbent operators continues, it is amazing to see the crowd outside stores selling Jio’s phones and services.
When I go to my office in the morning I am amazed to see crowd outside a store that sells Reliance Jio’s services. A 9 AM, one hour before the store opens, a policeman is posted to control the crowd. It takes three to four hours to get a SIM card, if one has proper documents. The store owner is particular about the documentation and it is only Aadhaar based. Distributors will not be able to fudge numbers.
Should this worry Airtel, Vodafone and Idea Cellular? Or it will be a repeat of Monsoon Hungama that led to chaos outside stores selling Reliance Phones in 2003 but ultimately the company (now RCom) could not do well. Under Monsoon Hungama offer, the company sold handset and mobile connectivity for Rs 501 that created a mass frenzy. However, it soon fizzled out and now RCom is not even considered a serious competition by the big three operators. It is struggling at fourth or fifth position. It is to be noted in 2003 the telecom venture of Reliance was controlled by Mukesh Ambani and not his younger brother Anil.
There is a basic difference between India’s telecom market in 2003 and in 2017. Today a customer is fed up of poor quality of services. There are frequent call drops in metros and big cities. Data speed is very poor. If Reliance Jio is able to offer good quality of services, people will migrate to its services.
In 2003, the company was offering CDMA phones. It was competing with the big three (Airtel, Vodafone and Idea) GSM operators for the same set of voice customers. However, its drawback was that a proper eco-system was not developed around CDMA technology. There were no good quality CDMA phones in the market. Moreover, there was no international roaming. High quality customers did not find its services attractive. It had to be satisfied with low ARPU (Average revenue Per User) customers.
There are no such drawbacks with its services now. Handset is not a limiting factor. Roaming is available. It is well positioned to attract high end customers. There is a void in the market for good services. The only pre-condition is that it should be able to provide good quality of services.
So, its target was low end customers so that it could get a good subscriber base, now it will be able to attract high end customers who will love to migrate to its network. Presently one will not find middle class and high end customers outside stores as they will not stand outside stores for four hours to give their finger prints.
Another big difference between 2003 and 2017 is that under Monsoon Hungama there was no provision to protect its ARPU. Now, the company has adopted a clever pricing strategy. A customer will have to pay a minimum of Rs 149 per month, which is much higher than the ARPU of a prepaid GSM customer. According to the regulator, ARPU of a customer is GSM customer is Rs 105 per month. If one really wants to use data, one will subscribe to the next package, which is Rs 499 per month.
The tariff may appear to be low to customer. Reliance Jio has, however, protected its revenue stream. Its competitors should worry about their quality of services. They can also offer some innovative tariff scheme and hold on to their subscriber base.