Reliance Jio- Disrupted Indian Telecom
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Presented to Prof Tom Brush, Prof of Strategy on Nov, 2018.
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Reliance Jio- Disrupted Indian Telecom
- 1. Jio | Disruptor in Indian Telecom Industry Presented By: Iris Gohain Kaushal Kishore Mohnish Rajput Sruthy K M Competitive Strategy
- 2. Market Standpoint* Jio | Reliance Group of Industries Jio | Disruptor in Indian Telecom Industry 2 Refinery Retail Media Textiles Petroleum Petro- chemicals Text Thatâs not all: âș Life Sciences âș Logistics âș Clinical Research Services âș Solar âș Industrial Infrastructure âș LYF (4G Services) âș Jio Infocomm âș Revenue: USD 60 Billion âș Operating Income: USD 10 Billion âș Net Income: USD 5 Billion âș Total Assets: USD 110 Billion âș Jio Assets: USD 35 Billion (~ 32% of total assets) *As of 2018
- 3. Jio | Introduction to Indian Telecom Industry Jio | Disruptor in Indian Telecom Industry 3 The market: - Subscriber base: 1.05 Billion - Worldâs second largest telecom market - Worldâs second largest smart-phone market - Worldâs fourth largest app economy - Foreign Direct Investment of USD 30.07 Billions, between April, 2000 to September, 2017 By 2020: - Mobile industry to create an economic value of USD 190 Billion - Revenues from the telecom equipment sector are expected to grow to US$ 26.38 billion by 2020 - The number of internet subscribers in the country is expected to double by 2021 to 829 million - Overall IP traffic is expected to grow 4- fold at a CAGR of 30 per cent by 2021 - Total 5 Million jobs to be generated: 3 Million direct and 2 Million indirect The risks: - Government regulatory risks: The Telecom Regulatory Authority of India regulates spectrum ownership and telecom aspects - Technology obsolescence, requiring repetitive investments - Amongst worldâs highest spectrum costs and lowest subscription costs
- 4. Jio | Introduction to Indian Telecom Industry Jio | Disruptor in Indian Telecom Industry 4 Cost Structure of a typical telecom company Time Costs Fixed Costs Indication âș Telecom industry typically requires high initial investments in infrastructure to set-up network coverage, however, variable costs are a small percentage of initial investments âș The assets would depreciate irrespective of the usage, with depreciation depending upon company policy âș Jio started with acquiring Infotel Broadband Services, for USD 409 M, the salvage value of the company, instantly assuring nation-wide coverage
- 5. Jio | Introduction to Jio Infocomm Jio | Disruptor in Indian Telecom Industry 5 History Market Share Products Jio Infocomm - Telephone Network Services - Wireless/ Optical fibre Broadband Services - Smartphones - Mobile Wallets - Mobile Infotainment - Jio acquired a staggering 19.62% revenue share within just 16 months of public operations (staring September, 2016) - Growth aided by the spur of âDual Simâ smartphones across India, leading to users subscribing to Airtel/ Vodafone-Idea as primary sim card and Jio as secondary sim card - Acquired Infotel Broadband services (only company to own 4G spectrum in all 22 telecom circles across India) for $670 M in June, 2010 - Telecom services were announced on December 27, 2015 - Went public on September 5, 2016 Subscriber Market Share Vodafone-Idea Airtel Jio BSNL Others 35 32 22 11 - 10 20 30 40 Vodafone-Idea Airtel Jio Others Revenue% Revenue share in Telecom Market â As of June, 2018 Indian Telecom Industry â Total Revenue $ 4.4 B 38% 10% 20% 30% 2%
- 6. Jio | Porterâs 5 forces for Indian Telecom Industry Jio | Disruptor in Indian Telecom Industry 6 The 5 Forces Buyer Power Competitive Rivalry Threat of Substitution Threat of New Entry(Low) Supplier Power Moderate âș Lot of software providers âș Little or no forward integration High âș Availability of lot of choices &low switching cost âș Demand highly sensitive to economy Low âș Alternate modes requiring data, a prime service offered by Jio, reducing substitution threat Low âș High capital cost for new entrants âș Almost saturated market for voice segment High âș Existing players with high market penetration âș Deep pockets leading to âprice warsâ
- 7. Jio | Strategy and Commitments Jio | Disruptor in Indian Telecom Industry 7 Competitive Advantage Technology: âș With exclusive 4G investments in all 22 telecom circles across India, Jio had a strong cable network and used mobile data for voice calling Base Strategies Prior to launch: âș Invested in new-age technologies: Invested in 4G and 5G capabilities across all 22 telecom circles of India prior to launching consumer services. Through this investment, Jio raised the barrier for incumbents to compete in 4G segment Post Launch: âș Growth Hacking Strategy: Focused on Acquisition, Activation, Retention, Referral and Revenue rather than break-even âș Blue ocean Strategy: Jio offered complete service bundles at lowest prices, creating a âBlue Oceanâ. Segmentation and customer acquisition: âș Provided premium 4G services at 10 times lower price compared to its competitors, focusing on data rather than saturated voice-calling segment âș Provided free sim cards with no-cost bundle services for 6 months. âș Reduced SIM activation lead time from 24 hours to 0.25 hours Other advantages: âș Free services including calling, data, SMS and Jio infotainment, increased customerâs inclination towards use of Jio services âș Referral bonuses to implement âword of mouthâ marketing âș Used âRazor and Bladeâ model for recurring revenue focusing on increasing market share and offering bundle services at affordable prices âș Used late movers advantage to understand the industry and cater demand âș Focused on high asset utilization by offering promotional discounts in initial period and then retaining customers through âBest services at cheapest price offeringâ
- 8. Jio | Competitor Analysis Jio | Disruptor in Indian Telecom Industry 8 Pros for existing premium segment competitors âș Strategic alliances with top smartphone manufacturers including, Apple, Sony Ericsson and Nokia â boosting brand equity and bottom line of the company âș High geographic coverage âș Running market campaigns leading to higher visibility âș International calling privileges Cons for existing premium segment competitors âș High debt (Airtel) âș After-sale services are dissatisfactory (Vodafone-Idea) âș Higher sim card activation time âș Higher costs of subscription plans for telecom services âș Over-marketing leading to excessive calls received by users regarding new plans/ promotions Pros for other existing competitors âș Penetration across rural India âș Backed by Government of India (BSNL and MTNL) âș Subsidized prices to cater to lower income group segment of population (BSNL and MTNL) âș Bundle package availability (Landline, Internet and Mobile) reducing overall consumer costs Cons for other existing competitors âș Poor customer services âș Resistant to technological changes â slow to react on consumer demands Competitor Analysis Pros with respect to Jio Premium Segment (Airtel and Vodafone-Idea) Others (BSNL, MTNL and TATA DOCOMO) Cons with respect to Jio
- 9. Jio | Strategy Swot Analysis Jio | Disruptor in Indian Telecom Industry 9 Strength-Opportunity âș Already operating on upgraded technology, hence this has eliminated upgradation costs substantially âș Strong balance sheet, huge potential in terms of funds to invest Strength-Threats âș Focusing on data services improved Jioâs market penetrations âș Differentiated from incumbents in terms of âBundle offeringsâ at cheaper rates Weakness-Opportunity âș Huge capital is a threat however, it can be recovered by recurring revenue from large customer base Weakness-Threats âș Customer segment highly price sensitive, offering the cheapest overall bundle to retain customers caps the risk substantially Jioâs Strategyâs SWOT Analysis Opportunities âș High data requirement by customers âș Poor services by incumbents Strengths âș Deep Pockets âș Technology Weaknesses âș Huge investments in assets Threats âș Saturated markets in voice segment âș Incumbents in strong position
- 10. Jio | Industry Impact Jio | Disruptor in Indian Telecom Industry 10 Impact on competitors - Very agile ISP(Internet Service Portability services) from competitors - Industry consolidation (M&A) - Bankruptcy of certain players Impact on customers - Substantial decrease in average price/ call - Increased data penetration and adoption in the country Jio proved itself to be an industry disruptor with tangible impact on both customers and competitors
- 11. 11 Thank You!