In early September 2016, Reliance Jio finally announced its formal entry into the Indian telecom sector. In line with industry expectations, the entry has been grand with an entire gamut of freebies offered. This has been disruptive to a point as incumbents immediately responded by slashing their tariffs.
Operators are now working on strategies to offset the potential damage that their subscriber base, profitability and investments might undergo in the coming months. While operators derive close to 80 per cent of their revenues from voice, RJIL has decided to provide the service free of cost to its users on a permanent basis.
However, the industry has its doubts about long-term sustainability of RJIL’s business model. It is quite evident that the price points being offered by the company will not bring any profits for a long time. In fact, the discounts would only seem tempting initially during the trial period. The true picture will emerge post December 2016 when users will have to pay for these services. Only a few days into the launch and complaints about intermittent speed are being reported. Besides, the controversy around point of interconnection continues to be a challenge. Without adequate interconnect points, the service experience is bound to be a big disappointment. Apparently, 75-80 per cent of the calls made from RJIL’s network to other operators’ networks fail to connect. The initial exodus of users has not been as significant as that witnessed during 2002, when Reliance disrupted the voice market with its “Monsoon Hungama” offer.
Moreover, the Reliance Group has so far not been able to make a mark in any of its customer-facing businesses. That said, these are exciting times for the Indian telecom sector. It would be interesting to see how the RJIL story unfolds in the coming months. Until then, the users can make the most of the benefits offered by the company.
