Why Mukesh Ambani’s 52 Million Jio Users Don’t Add Up To A Winning Total Yet

Mukesh Ambani of Reliance Industries announced to a gathering of employees and business partners yesterday (1 December) that in the first three months of operation, Jio has gained more than 52 million subscribers. Its average data traffic was 25 times that of rivals. Voice calls, which were free, saw a drop in failure rates to around 20 per cent from much higher levels earlier. Ambani said over 900 crore calls originating from the Jio network to Airtel, Vodafone and Idea were blocked in the first three months, but the failure rate was falling.

What is one to make of these numbers?

First, the subscriber numbers look healthy, but they don’t add up to significant success as yet. It is simply not possible to draw any conclusion about the value of these subscribers since they were enjoying free services. In India, anything free tends to have a large user base.

Second, 52 million subscribers may not mean much in a country where over 80 per cent of mobile phones often carry two Sim cards. Right now, it only means Jio has found a slot, however temporary, in many smartphones. Switching Sims is easy, and it is worth remembering that only one in 20 new telecom subscribers is a new one. How many of Jio’s 52 million subscribers are permanent additions will be known only after March 2017, for Jio has extended the free offer, replacing Jio Welcome Offer with Jio Happy New Year Offer. Subscribers may start paying only after March next year, including the existing ones.

Third, the value of Jio’s high usage of data will also need to be questioned, since the network uses VoIP (voice-over-internet-protocol) technology for calls, which is basically about voice being transmitted as data. It is not clear if voice calls make up the bulk of the data usage.

Fourth, in October, two months after Jio’s launch, Airtel, Vodafone and Idea saw a rise in subscriber numbers by 2.33 million, 1.12 million and 1.43 million respectively. These numbers indicate that paying customers continue to go for the market leaders despite “free” offers from Jio. This is indicative of their competitive strength, even though Jio must be denting their revenues. Jio can claim true success only when it is able to port subscribers away from the Big Three after March 2017. In a market with over one billion mobiles, growth for one can only come from loss to another in some form.

Fifth, for Ambani, who has invested over Rs 125,000 crore in Jio, this is a must-win battle. So the stakes for him are higher than those for his main competitors. This explains the freebie extension more than anything else.

What one can divine from the Jio numbers and the extension of the free offer is that Ambani wants a critical mass of at least 100 million users before sending users some minimal bills.

At 100 million, assuming all subscribers stick with Jio after March, Ambani would be the country’s fifth largest player, after Bharti Airtel (257 million as at the end of August), Vodafone (200 million), Idea (177 million), and Reliance Communications (RCom), which is merging Sistema and Aircel, and could theoretically be said to have around 183 million subscribers. But both RCom and Sistema seem to be losing customers, according to the latest Telecom Regulatory Authority of India figures for August.

RCom could also be the biggest loser from Jio’s entry, as two Reliance brands will be competing for subscribers at the same time, and this is apparent from the numbers. In August, RCom, run by Anil Ambani, lost over 8.4 million subscribers, just before Jio was about to launch.

The long-term reality is probably that RCom and Jio will have to work together and merge. The younger Ambani announced a few months ago that RCom and Jio are in a “virtual” merger, sharing networks and other facilities. It is only valuations and the pending merger with Aircel that may be delaying converting the virtual into the real.