Reliance Jio has taken the country by storm with thousands of people queuing up to get a much sought after sim card. With seemingly unbelievable introductory offers including free voice calls and cheaply priced data packages, Mukesh Ambani is all set to make a whopper of a profit.
Kshitij Salgunan deconstructs Reliance Jio’s business model by analysing their tariff plans in this article in Sify.
Everything Jio have done till now is intended at making money. Their tariff plans may look unbelievably awesome, but they will make more money by giving free voice calls than what the other companies make by charging you for it!
Attributing several of their introductory offers such as free voice calls and unlimited data at night to the elaborate infrastructure that has been laid out, the writer says
In the case of Jio, they have already laid an awesome fibre optic network which is designed to even handle the 5G and 6G. So, they do not have much of the data bandwidth problem. Other telecom companies were primarily made to handle voice calls and they have limited data bandwidth. Also, other companies do not own nationwide fibre network, so they have to pay to use the fibre network of other companies. This is the reason other companies don’t usually provide unlimited plans.
Prabir Purkayastha also calls much of frenzy surrounding the low pricing, a ‘razzmatazz of marketing’ in this article in Newsclick.
They have apparently offered Rs. 19 for free voice and 0.1 GB of data, which is unlimited at night. Seems very attractive for young users, does it not? But let us look a little closer. The Rs. 19 plan is for a day! This means over 30 days it is Rs. 570 and therefore not low at all. And night is defined as 2 AM to 5 AM! The Jio plans, once you look at them closely, look a lot less attractive than they appear at first sight. If we “deconstruct” them, offer by offer, we see they have a 7 day plan, a 21 day plan, and finally a 28 day plan. If we convert them to equivalent monthly plans – apples to apples and not apple to oranges -- we find that there are others who are offering similar data services.
According to this report in Moneycontrol.com, the company which already has 1.5 million 4G customers, is aiming to reach 100 million by roping in devices like iPhone, Xiaomi, Motorola and Lenovo who were not a part of the preview offer so far.
Despite this, there are a large number of customers vying for a sim card and the activation has not been without problems.
When one friend has an extra Reliance Jio sim pic.twitter.com/WGyG2WiCA1— The Viral Fever (@TheViralFever) September 6, 2016
Despite these allegations, Reliance Jio was launched on 5th September. The state owned Bharat Sanchar Nigam Limited has taken a pragmatic view with its CEO reported as saying
As far as challenge is concerned, we cannot wish it away... I believe, BSNL is in a position to match Reliance Jio’s tariffs most successfully, because we are incumbent operator. We are landline and optical fibre operator so our broadband tariff rides on our own network... We don’t have to start procuring, investing and then come out with offerings.
Other companies are a lot less optimistic. The telecom operators lobby , COAI, has written to the Prime Minister's Office urging that the government must ensure fair competition. The companies responded to Mukesh Ambani’s allegations that the existing operators were not providing interconnect capacity and that there were many call failures due to this.
(RJio seeks to) offload tsunamis of asymmetric voice traffic at IUC terms which will choke and financially destroy competition. IUC regimes anywhere in the world are meant to facilitate fair competition, and are not designed for such abuses
They (operators) wish to politely clarify that they are in no position, by way of network resources, or financial resources, to terminate volumes of traffic which are markedly asymmetric. Neither are they obliged to entertain interconnect requests which are derived from abnormal induced traffic patterns that game the IUC regime and are anti-competitive,
But apart from the business side of the Reliance Jio tamasha, there are other contentious issues including the use of Prime Minister Narendra Modi as the brand ambassador of sorts. In fact when Chairperson Mukesh Ambani launched Jio at the Annual General Meeting held last week, he did it against a huge backdrop of the Prime Minister and dedicated the new business as a means to realise the Digital India vision.
The Wire has spoke to different professionals in advertising who have all agreed that the full page advertisements are not illegal per se, but are improper. Santhosh Desai from a marketing agency called Future Brands had this to say -
There’s no established protocol for it within the advertising industry. There are certain rules. Companies can use icons and famous people who have passed away like Mahatma Gandhi. But this [using the PM’s photo] is not kosher within the industry and raises interesting questions about appropriation. Can other companies come forward tomorrow and try to connect their products as fulfilling some government initiative.
NDTV reported the series of aggressive tweets by Delhi Chief Minister and AAP leader Arvind Kejriwal alleging that the Prime Minister was in Ambanis’ pocket. He also said that the labourers would teach him a lesson in the 2019 elections if he continued to openly favour industry in this manner.
The Congress leadership too questioned the use of the photograph. Congress leader Ajay Maken asked - There are certain norms for displaying photo of the Prime Minister in an advertisement. As a former Union minister, I am aware that prior permission has to be taken. Had Reliance taken permission from the PM or the PMO?
In the Daily O, Suraj Kumar Thube concludes that it is symptomatic of corporate control of media. That the Prime Minister was seen in an interview of News18, which is owned by Reliance, soon after the ads appeared, did not go unnoticed.
Toeing the line of the establishment, through a more graphic imagery of digitised prostration, is what the nexus between the government and Reliance Jio is all about. The disquieting newspaper ads have now been followed by a television ad that glosses over the potential of Digital India, powered by the "inclusive vision" of Reliance. The voice over for this particular ad, as has been the case for a number of recent ventures, is done by Amitabh Bachchan who completes the vicious triangle of political dominance, corporate weight and the enticing, Bollywood glamour quotient.
Another serious allegation levelled against Reliance is the improper means that were used to win the auction of the use of spectrum. This detailed investigation by Paranjoy Guha Thakurta, published in the EPW finds that a forged bank guarantee document was used by the winning company, Infotel Broadband Services Private Limited (IBSPL) in 2010, and was soon after acquired by Reliance.
A draft report of the Comptroller and Auditor General (CAG) of India, a constitutional authority mandated to oversee public finances, had found that a so-called front company, Infotel Broadband Services Private Limited (IBSPL), that had won the spectrum in the auction and which had subsequently been acquired by RJio, had used a forged document, a bank guarantee given by Axis Bank (BGR 2014; Majumdar 2014; Guha Thakurta 2016a). That is a criminal offence.
However, when the Center for Public Interest Litigation filed a case asking questioning the manner in which Jio obtained the license; the Supreme Court did not take many of the irregularities into account. Moreover, the final CAG report too did not contain many of the issues included in the draft stage.
Even as the corporate wars continue on the one hand, Reliance and India’s richest man Mukesh Ambani is invincible. Unfazed by allegations, the industrialist remains confident that he will not lose money and have a healthy return on capital.
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