JIO
– An Analysis of Prospects and Challenges
A
common refrain, question, discussion point among at least us Telecom
Professionals {those outside Jio at least} centers around what it is doing,
what it plans to do, what disruptive impact it will have on services as well as
devices and whether it will achieve whatever objectives it has set out for
itself. My humble submission here is one simple statement: the key question is
not among the points being pondered above; the real question is whether it, or
indeed we as a nation, can afford it to fail? Indeed, does Jio have a choice in
the matter except do what it is doing?
Before
we move into details, just look at the numbers involved: as per Telecomtalk
& Economic Times articles dated January the 14th 2017, it has
infused 1,71,000 Crore into this venture; another 30,000 Crore is being
planned. That brings the investments to 2,01,000 Crore. Its current subscriber
base is between 67-73 Million Customers as on date, and is expected to touch
100 Million subscribers as per the news articles above. That means Jio will
have to rake in 600 Rupees per month per customer just to recoup this {what I
think is} Capex assuming a payback period of 10 years for the same. This does
not account for Opex and other expenditure, system ugdrades that will be needed
in future…
But,
increase this subscriber base to 100 Million, and the required ARPU rough
estimate falls drastically to Rs. 434. At 150 Million, this falls even further
to a much more realizable and realistic 289 Rupees, which is far nearer to what
the current ARPUs are today. Thus, it doesn’t have a choice… and neither do we.
WELCOME
COMPETITION
Rather
than worry about the disruption – and there has been, & will continue to
be, disruption – let us welcome it. It is a harbinger of better services to the
customers. Yes – for the industry and the employees, it does mean a very
challenging and yet rewarding time; yes – it does involve, pain in the short
term, perhaps medium term for the employees into this industry as well as for
some companies. But for the customer, the future is exceedingly bright, as this
disruption and ensuing competition will not just depress prices {sadly}, but
also, hopefully, unlock innovation and development of
DISRUPTION
Disruption
is not always bad, though it is always and nearly without exception, painful.
It forces industries to introspect, set things in order, cut the wastage and
the incorrect steps, and move forward. Added to this is the impetus it gives on
giving a better end-customer experience. Let us take the Jio example. I have not
used Jio services, but have used others, and on 3 handsets. The experience is
very revealing, if you consider from a customer usage experience
I
have tested the 4G as well as 3G speeds for the past 2 odd years nearly
half-a-dozen cities in Western India as well as on journeys. The average 4G
speed I register is around 5mbps, and highest I have ever experienced is 14mbps
{once only} and the lowest 4mbps. Now these speeds are 3G speeds or 3.75G
speeds; 4G experience should be at least 7-8mbps, ideally or optimally above
10mbps for a superb 4G experience, perhaps higher. Let us not get too specific
or technical here.
IMPACT
Now
the entry of Jio will cause, or rather force the competitors to invest in
upgrading their networks in order that the customer gets a superior experience;
they need to do this – as indeed they already are beginning to do. This is the
first positive impact of competition induced disruption. Second, it will expose
customers to a superior service along with all its advantages, unlock greater
uses and scope of usage, open up new usage avenues that the greater speeds will
bring,. It will also further develop other nascent markets – like the online
video and content space, as an excellent example. As market size increases – as
seen above – prices crash, further creating new market space…
ONWARD HO!
This
brings us to the core ground reality+: currently, 4G phones are available
starting around 4K; how many customers can afford that range, given our per
capita income? How do you pull in new customers? You have to give a value
offering; thus – the focus on a 4G experience at cheaper rates of devices. This
will open new markets, as well as improve viability for Jio.
THE COMPETITION
In
one word – it has no choice either. Both in services and in devices, there is a
felt need for new innovative thinking in terms of a variety of areas.
Companies, though currently hamstrung due to earnings issues, will need to find
the space and the capital to innovate and improve their offerings. Fact of the
matter is neither wing of this industry is making bushels of money – services
or devices. And I order to maximize stakeholder values, they need to solve this
conundrum – Jio or no Jio… namely, how to get more customers into the 4G fold….
Comments
Post a Comment