Mukesh Ambani re-enters the telecom market
Fifteen years have passed since the last time Mukesh Ambani of Reliance Industries limited entered the Indian telecom market for the first time. A lot of water have passed underneath the bridge since then, most importantly the elder Ambani brother giving up his telecommunications dream to his younger brother as part of a family settlement. But even before the family split, Reliance Communications’ initial promise had petered out, and today, the company, while a global leader in international data traffic, which owns and operates several submarine cables across the world, is behind rivals in the consumer mobile market. Also, much has changed in the world when it comes to the way people use mobile phones. In mid-2007 Steve Jobs of Apple Computers announced the first iPhone. The dynamics of phone usage changed forever. From making calls and sending the occasional message, mobile handsets became smartphones. The mobile phone became an extension of our lives and enabled the rise of services such as Facebook and Twitter and the creation of billionaires.
India revolutionised cheap voice calls, with operators such as Airtel creating a ‘minutes factory’ in their own words. The cheap availability of voice calls and the introduction of cheap Chinese-made handsets did take mass telephony into the market. Discounting multiple handsets, it can be fairly estimated that one in every two Indians has access to a mobile phone today. As mentioned earlier, the mobile phone itself has evolved. However, while tariffs for voice have been cheap, data tariffs particularly for pre-paid users who form the large majority of mobile phone users in India, have remained fairly steep. And this has remained a challenge for Indian start-ups as well as the Government’s ambitious Digital India programme. Much like air travel, reliable high-speed mobile data remains confined to a small sliver of Indian society. Mukesh Ambani wishes to change all that — his Reliance Jio drastically reduces the prices of data packages for Indian consumers. As a result of Jio’s aggressive data pricing, coupled with Reliance’s white label mobile phone handset, other operators across the board have reduced the prices for data access. Reliance hopes to stand out from the crowd by offering free movies, TV shows as well as free phone calls. But, the company will continue to face huge challenges. Incumbent operators in India will make life difficult for Reliance and as of now have access to far more efficient spectrum for their 4G operation. They will not let the oil and plastics monolith to take away their market, so this space will become highly competitive.
Yet, there is a strange legacy of Mukesh Ambani’s first foray into telecom. The fact that India has some of the cheapest mobile tariffs in the world is due to his previous entry. The success of Reliance Jio is still not a given — this is a sector where major aspects, such as technology, can change overnight. But if Mukesh Ambani manages to change the pricing dynamics of the market, he should be congratulated, as cheaper data will make it accessible to more Indians.