JIO: Expanding into New Market
Jio is India’s largest telecom provider in just 3 years. It started operating in the year 2016 as a telecommunication provider, it gained more than 50 million subscribers in exactly 83 days of launch.
Jio was spun out of Reliance Industries (RIL) majorly worked in energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles.
Jio managed to become India’s biggest telecom in 3 years. This was never done in the history of Telecom in any country. Many critics were skeptical that as soon as Jio will lose its user base as soon as they start charging for their services. But the opposite happened, and it became India’s biggest telecom provider. It also resulted in the cheapest 4g internet on the planet (70 cent/Gb).
India’s mobile telecom industry is the second largest in the world after China with over a billion telephone subscribers. The market is also one of the world’s most competitive. On the eve of Jio’s launch in 2016, eight players held at least 5% market share. The leader was Airtel with a 24% market share.
Building a Network and a Strategy
Jio’s journey started way back in 2010. Jio bought another company Infotel Broadband Services Limited (IBSL) in 2010. From 2010 to 2017, Jio built the world’s largest 4G and LTE-only network. It involved 250,000 kilometers of fiber optic cables and 90,000 4G towers. Built-in partnership with foreign network providers like British Telecom and Deutsche Telecom, the network was a green field.
As they built up their massive $30 billion networks, Jio’s management did extensive research on the Indian telecom industry.
The research found that people were paying too much for data services. Only 24.3% of the Indian population accessed the mobile web in 2016. The average Indian consumer used 400 MB of data per month. This falls far short of what is needed in a world with YouTube, Facebook, and the mobile web.
Finally, Jio was launched in Sep 2016.
Business Strategy
● Acquisition — After the commercial rollout of Jio in September 2016, Jio offered free services to its customers for 3 months. This plan worked as the trump card for Jio to acquire the customers. Within one month, Jio was able to acquire 16 million subscribers.
● Activation — The users were provided with the best experience, which was never provided by any telecom service provider. The unlimited high-speed, 4G data with unlimited calling was unimaginable to the customers.
● Retention — Jio didn’t stop here. In the new year in 2017, they extended the free services to the users for another 3 months. Jio became the first-ever telecom company to provide 6 months of free service to customers. In just two and a half years into the business, Jio gained more than 300 million active subscribers. It took more than 19 years for its competitor, Bharti Airtel to reach such a number. Such was the power of Jio.
● Referral — The customers became its preacher. Jio got more and more business through positive customer reviews and user experience. This added as a boon to its tremendous growth.
● Revenue — Slashing the prices to 1/10th the existing cost, Jio got ahead with revenue, which was the major factor in getting such a leap in the market.
Challenges Jio faced
● Failed attempt to enter the market in 2002 — Reliance initially entered the market in 2002 but they failed to gain any traction.
● 6 years to Build infrastructure — It took Reliance 6 years to build the infrastructure all over India and launch Jio in 2016
● Lawsuits from competitors — Various competitors like Airtel and Idea filed lawsuits against Jio accusing them, of predator pricing
● $20 Billion debt — Jio got under almost $20 Billion debt for the launch of its service and later Jio had sold some of its shares to pay for the debt
Marketing and Distribution
To get the word out, the company hired some of India’s most famous faces. They signed up actor-producer Shahrukh Khan, known as the King of Bollywood, to pitch the service.
Jio also sponsored seven teams in the Indian Premier League, the world’s most-attended cricket league.
The company’s networks were state of the art but are not compatible with older 3G phones. So, consumers needed to upgrade their hardware. To help with this, Jio opened a new affordable phone company called LYF.
Competitor Response
Jio’s launch offer shook the entire industry to the core. It took 12 years for Airtel to gain 50 million subscribers. For Vodafone India and Idea both, it took 13 years.
Jio got there in just 83 days after launch. Jio was adding 600,000 subscribers a day. Mukesh Ambani said that the company was adding 7 customers to its network each second, every day for the first 170 days of its launch.
People waiting in long lines to get their Jio SIM cards. Free application forms were being sold for a hundred rupees or $1.40 on the black market.
The rest of the market had to retool their plans to match. Airtel slashed the prices for their 4G/3G data plans by 80%. Idea Cellular, 60%.
Airtel and others approached the Competition Commission of India or CCI to accuse Jio of indulging in “predatory pricing” — selling its services under its variable cost with the sole intention of eliminating competitors.
In the end, Jio’s entry forced a wave of bankruptcies and mergers. Vodafone India, having lost 10% off their margins, merged with Idea Cellular. The eight or so telecom providers operating in the market as of 2016 consolidated down to four, with Jio the leader.
What Jio Could have done better
● Better branding — Initially Jio didn’t come as a cool or young brand, rather it seemed like a cheap brand and the branding could have been done better by making it look more premium carrier.
● Including 3G capabilities — Jio doesn’t work to support 3G and at the time of launch in 2016, a significant portion of people was using 3G only smartphones and this hindered the adoption.
● Distance from the government — A lot of people viewed Jio as being close to the government and thought that they were getting preferential treatment from the government.
Conclusion
Jio now holds 35% of the market. Jio achieved something impossible. It took incredibly risky bets and, in the end, it paid off. Entering a new market is not easy and completely dominating that market is incredibly difficult but Jio proved everyone wrong and succeeded. Google recently invested $4.5 Billion in Jio bringing the total valuation of the company up to $68 Billion making it more valuable than all other businesses of Reliance Industries put together.
Jio has even bigger plans like launching a new phone with Google and investing more in R&D. Jio is probably one of the best-case studies on how to enter a new market and then how to totally dominate it.
