Five Years of Reliance Jio: How Jio changed Indian Telecom Forever

On 5th September, scores of companies - from giants to minnows - all gathered to congratulate Reliance Jio. The telecom giant, who didn't even exist when most of us had our first rendezvous with internet, has completed half a decade of existence. And what a 5-year stint it has been.

This is a story of how an upstart became the benchmark for telecom in India, leaving everyone else in its wake.

A Remarkable Origins Story

Reliance Jio burst onto the telecom scene - in a very literal sense of the world - in 2016. However, the story of Jio was set in motion more than a decade ago.

In 2010, Reliance Communications bought a 95% stake in Infotel Broadband Services Limited (IBSL). Infotel had been in business for the last 3 years but had seen itself skyrocket in the broadband sector. However, when Reliance acquired Infotel for ₹4,800 crore, it was considered as shrewd business; Infotel was the only firm to have spectrum in all 22 telecom circles. More importantly, it had the crucial 20 MHz band across India, a band telcos use for their 4G networks.

This spectrum proved vital for Jio's 4G ambitions, as by October 2012, the telco had informed the DoT that it was ready to test its Voice over LTE, or VoLTE technology.

In January 2013, RIL renamed Infotel Broadband as Reliance Jio Infocomm Limited, a name Jio uses till date.

By the time 2015 arrived, the telco's direction was apparent. However, controversy struck in the same year when a Prashant Bhushan filed a PIL, alleging a ₹2,284.2 crore loss to the exchequer by citing a BWA-related rule. However, DoT described the rule and allowed Jio to offer voice telephony. That same year, in December, Reliance Jio had launched its 4G services internally.

After the 2016 telecom spectrum sale, which saw 4G spectrum going under the hammer, Reliance Jio emerged as one of the standouts. On 5th September 2016, Reliance Jio hit the shelves with its free 4G SIMs. The Jio Welcome Offer, which the telco extended once, started from 5th September. First, Jio offered its users unlimited voice and data till 31st December, 2016. However, seeing the unprecedented response, the telco extended the offer till 31st March, 2017.

The response for the telco was instantaneous, and extreme. By the time the Welcome Offer ended and Jio actually started charging money, it had over 100 million subscribers.

Reliance Jio Today

Jio quickly became the obvious choice of millions of people across the country. People didn't flock in their droves to Jio because it had a superior network and coverage; in fact, the telco's coverage was famously poor during the first few months. The key driving factor was the price.

As of the latest TRAI data, from June 2021, Reliance Jio is the market leader. The telco has 436.67 million subscribers; over the last 4 years 3 months, the telco has managed to quadruple its subscriber count. Jio sits on 36.98% of market share, which means that every third mobile subscriber in India is on its network.

This led to an exponential increase in data consumption with monthly data consumption per user witnessing over 1,303 per cent jump from 878.63 MB to a staggering 12.33 GB between December 2016 to March 2021, revealed the latest quarterly telecom performance indicator report published by TRAI.

Since the beginning of the commercial operation of Jio in September 2016, internet data cost has gone down by over 93 per cent from around ₹160 per GB to ₹10.77 a GB, as per performance indicators reports published by TRAI.

The telco also is one of the more financially sound telecom companies, as it reported a ₹90,287 crore in revenue in FY21. Furthermore, the telco has the the largest asset bank in the telecom sector; at ₹3.05 trillion, it falls short of Bharti Airtel at ₹3.46 trillion, but remains comfortably ahead of Vodafone Idea at ₹2 trillion.

Jio Platforms - Reliance's Big Digital Bet

When Reliance Industries Limited erased all of the debt of Jio in October 2019, by setting up a wholly-owned subsidiary that became Jio Platforms Limited, few would have thought what a masterstroke that will turn out to be. For context, RIL infused ₹1.08 trillion in JPL in form of Optionally Convertible Preference Shares. The parent company also had set up the WOP with about ₹65,000 crore in equity, equity shares and OCPS in Reliance Jio Infocomm Limited.

This internal reshuffle took the newborn company's total equity to ₹1.73 trillion; a remarkable level of equity. RIL had made Jio essentially debt-free. At the time, when Jio was rapidly gaining market share, this move just gave the telco more financial power to flex its muscles.

In May 2020, JPL had an enterprise value of ₹5.15 trillion; more than everything else Reliance does, combined. Jio Platforms alone stands as the fourth-largest company in India, behind RIL (including JPL), TCS and HDFC Bank.

But before that, Jio Platforms saw a blitzkrieg of funding from the likes of Google, Facebook, Intel and others. First, Facebook got itself a 9.99% stake in the company for $6.1 billion. In May the same year, Silver Lake Partners bought a 1.11% stake for $790 million. Apart from that, in May as well, JPL raised another $2.53 billion, selling 3.66% total stake to General Atlantic and KKR. June also saw JPL sell stake worth $5.25 billion sold to 5 new entities; Silver Lake increased their stake to 2.08%. Come July, Intel, Qualcomm and Google together bought stake worth $4.736 billion; $4.7 billion was bought by Google alone.

At the end of those couple of months of madness, the company had raised almost $20 billion in equity funding. It will be safe to say that Reliance's gamble worked rather wonderfully. JPL now owns all the telecom, enterprise and broadband business of Jio, along with all the digital assets and the JioPhone series of phones. Since then, Jio Platforms has managed to feature on TIME 100 Most Influential Companies list; not bad at all.

The Road Ahead - 500 Million Users

One thing has become increasingly certain - Reliance Jio will hit the target it has set for itself, and soon.

Per latest TRAI data, which dates from June 2021, the telco has 436.67 million subscribers; it has only about 63.33 million to go. It can optimistically hit the target a year from now, that is, by Q2FY23. That is still a tall order, but Jio can make it happen if a couple of things go its way.

First, the JioPhone Next has to be a great success. For now, it looks like it might be the key for Jio to tap in the 2G/3G userbase. However, the entry-level, 4G-ready smartphone was delayed by Reliance and Google days ago, citing chip and component shortages. The phone should come out by Diwali, though, and when it does, the other two telcos need to be ready for another windfall of customers to the market leader.

Second, if Vodafone Idea goes down - which it is desperately trying to avoid - then both Jio and Bharti Airtel will have to share the customers. Not like they'd be particularly averse to the idea; though Jio will most likely get the lion's share of the same. However, it will be a huge error on Jio's part to get complacent while Airtel is as competitive as ever.

The target looks almost within grasp, however, it still remains miles away.

Reliance Jio - A True Connectivity Behemoth

It has been 5 years of great success at Jio. However, the telco needs to look at some of the more pressing issues at hand. One of the key issues is the ARPU. For now, it has managed to keep itself profitable, with an ARPU of ₹138.4. However, Airtel has an ARPU of ₹146. The difference here is staggering; if Jio matches Airtel's ARPU, it will see its revenue jump by ₹3.32 billion, a substantial jump.

As India prepares for 5G, the race is truly on for the telcos to bring 5G first to the masses. However, given Vodafone Idea's perilous situation, it has more or less become a two-horse race already. Jio and Airtel both boast 5G-ready networks; while Airtel is working with international partners, Jio has developed its 5G stack locally. It will be interesting to see who comes out on top, and so far, it looks like Airtel might just about edge Jio out.

It is still too early to say who will bring 5G to India first, much less the future. The shift to 5G will be gradual, and laborious. When there are over 300 million 2G users in the country, that has to be expected. Still, India's connectivity revolution depends a lot of how Jio delivers it to almost half a billion of its customers.