In September 2016, Mukesh Ambani, Asia’s richest man, launched his newest venture, a 4G mobile network.
The oil tycoon had celebrated its soft launch months earlier in Navi Mumbai, headquarters for petroleum behemoth Reliance Industries, India’s largest private company. Bollywood superstar Shah Rukh Khan and Oscar-winning composer A.R. Rahman performed in front of hundreds of waving Indian flags and a fireworks display.
“In this era, if you are not digital, and if you don’t have globally competitive digital tools and skills, you simply will not survive,” Ambani said in his speech. “You will get disrupted. You will be outcompeted. You will be left behind. You will become irrelevant.”
In the 90-minute presentation, Ambani promised that his new telecoms business, Reliance Jio, would alter the future of the country’s internet. “India and Indians cannot afford to be left behind,” he said. “Today, India is ranked 155th in the world for mobile broadband internet access out of 230 countries. Jio is conceived to change this.”
Ambani guaranteed that, after Jio’s public launch, for the average Indian, the internet would soon cost no more than a vada pav, one of the fried potato dumplings sold on the streets of his hometown, Mumbai, which costs about 12 rupees (16 cents).
What Ambani promised seemed impossible, even with all his wealth and power. At one point in 2016, before Jio entered the market, 1 gigabyte of data in India cost approximately 225 rupees ($3). And that was in the cities; internet penetration in the country’s rural areas still hovered at around 17%. Ambani was picking a fight with India’s largest mobile telecoms providers — Bharti Airtel, Vodafone, Idea Cellular, the state-owned BSNL — who had dominated the industry for years. Jio’s competitive pricing forced these operators to lower the cost of data en masse, but it also left the industry as a whole with deflating revenue and ballooning debts.
Yet four years later, Jio is the largest telecoms provider in India, which has the lowest mobile broadband tariffs in the world, according to the Nokia Mobile Broadband India Traffic Index. This is how Ambani did it.
The price war to end all wars
Reliance Jio’s Welcome Offer, which ran from September 5 to December 31, 2016, included free voice calling, 100 text messages per day, and a data package of 4 gigabytes per day at exclusively 4G speeds. All for free. It was topped off with a complimentary Jio SIM card.
“The first reaction was a bit of shock and awe,” said Deepak Maheshwari, a telecoms public policy researcher. “Obviously, people knew the starting prices would be quite attractive, but the way the pricing was done was well beyond the bounds of most people’s imagination, including the main competitors.”
Shah Rukh Khan, often referred to by his initials alone, was Jio’s brand ambassador at the launch. He was tapped by Ambani to narrate the company’s vision in its first commercials, which depict Indians from every corner of the country — a Sikh couple, several rice farmers, a Kathakali dancer — talking (for free) on their phones. “Now India will fly,” S.R.K. intoned.
Lines at Jio retail stores soon extended blocks. The deal enticed many Airtel and Vodafone users to sign up for a Jio SIM on top of their existing subscriptions. Memes began to circulate forecasting the death of the telecoms titans; one showed Ambani sitting on an iron throne made of cheap smartphones. He had announced a one-year target of 100 million new customers at launch. It took Jio only 170 days.
It’s not that Jio’s competitors weren’t also offering 4G; Airtel had been conducting a limited rollout of its 4G network in urban centers across India since 2014, for example. But the notion of unlimited 4G data — admission to the global internet without a toll — captured the attention of millions.
Jio’s entrance into the telecoms world was met not only with fanfare but allegations of predatory pricing. Telecoms competitors accused Reliance Industries of using the significant wealth from its oil and retail businesses to manipulate the telecoms market to its advantage. At the time, Reliance was making nearly $45 billion in annual revenue on its oil business alone.
What unfolded next was a price war. In 2016, the average revenue per user (ARPU) for the major Indian telecoms providers was close to $2. By 2019, it was nearly half of that.
“Free services got subscribers in phenomenal numbers and put huge pressure on the incumbent competitors,” said Mahesh Uppal, a telecoms consultant and director of ComFirst India, “which meant that they ended up having to offer services below cost by definition. You can’t possibly make money by giving anything that cheap.”
This slash in revenue generation played out between 2016 and 2018 through exits, mergers, and budget cuts, with each of Jio’s rivals adopting a different strategy to compete with the company’s exponential growth.
In 2017, Bharti Airtel sold off parts of its non-core businesses and many of its brick-and-mortar stores. By December of that year, Airtel had partially exited its East African markets in order to boost its margins and focus on holding ground on market shares in India. UK operator Vodafone and homegrown Idea Cellular, which largely sold in noncompeting regional circles, merged in 2018 to consolidate their customer base and hold off Jio’s advances through a pan-Indian business operation.
One episode played into the soap opera portrayal of the Ambani family business, mired in rumor and revered in mythology for years. Mukesh Ambani priced his own brother Anil’s company, Reliance Communications, out of the market, ultimately buying him out.
Anil Ambani spoke to the media at the time about his brother’s business practices: “This is a crisis of the wireless telecom sector and it has engulfed many people and many companies. This is something which is not for 10 players to enjoy. This is for two or three or four players to enjoy.”
Others levied criticism against Jio, claiming it had skirted telecoms regulations. Jio’s Welcome Offer, for example, was rebranded as a “Happy New Year Offer,” once the deal had reached a 90-day ceiling on launch promotions in December 2016, according to the Wire. In effect, this allowed Jio to maintain cutthroat pricing into 2017, which drove its initial growth. Meanwhile, decisions by the government of Prime Minister Narendra Modi appeared to hasten Jio’s advance toward monopoly. One incident seemed to characterize the affinity between the government and Jio: The company used Modi’s face in a full-page ad in The Times of India and the Hindustan Times, two of the country’s most prominent English dailies. Jio was eventually admonished by the ministry of consumer affairs and apologized for its “inadvertent mistake.”
By late 2019, the price war set in motion by Jio’s launch had reached a stalemate. Jio’s Average Revenue Per User (ARPU) sat at 128.4 rupees ($1.70) per user in the last quarter of 2019, after seven successive quarters of decline. While it is common for telecoms companies to operate in debt, without signs of rising revenue, Jio’s debt had by some estimates grown unmanageable. Rival companies agreed to raise tariffs under the coordination of the Cellular Operators Association of India, the country’s telecoms industry body.
Even as the industry scrambled to address its debts, the effect of cheap mobile data had already taken hold for millions of users. As Rahul Mukherjee, a professor of media studies at the University of Pennsylvania, puts it, “The price war was not just about Jio, but what Jio was able to make happen.” Mukherjee would see the change himself while taking an Uber in Delhi and watching his driver livestream the Cricket World Cup.
The Jio effect
Jio created a new consumer environment, in which competitive pricing allowed a new group of Indians — the poorest — to own internet-connected mobile phones and use those phones in novel ways. A 2018 report anticipated that India’s online content and streaming platforms would hit $5 billion in revenue by 2023. Around two-thirds come from rural India.
These rural provinces and towns are also where low-cost mobile data has led to the emergence of vernacular apps, catering to non-English and non-Hindi speakers previously boxed out of much of the Indian internet. Helo, the social networking app owned by TikTok’s parent company, ByteDance, recorded over 50 million monthly active users in 2019. Beyond Hindi, its most popular languages are regional — Tamil, Telugu, Malayalam, and Gujarati.
The ripple effects of the price war extend beyond digital life and into India’s network infrastructure, which telecoms companies were forced to build out to accommodate this same growing customer base of nearly three million new subscribers per month. India went from 90,000 telecommunications towers in 2006 to nearly half a million today. That served the country well during the Covid-19 lockdown in March.
As telecoms braced for the strain of more than half a billion internet users, newspapers ran headlines asking, “Will the Internet Crash?” But the network apocalypse never happened. In fact, according to data provided by Tutela, India’s telecommunications infrastructure was an unlikely success during the global lockdown, outperforming even some European telecommunications operations.
“A typical network operates at around 85% [of capacity]. In India, we’re usually operating somewhere between 60% and 65%,” Rajan Mathews, president of the Cellular Operators Association of India, told Rest of World.
A global player?
Jio itself has transformed alongside the telecoms landscape. Having waged a destabilizing price war, Ambani plans a pivot away from the conventional telecoms business, now trapped in the low-ARPU pricing model Jio introduced, and toward a web-scale operation.
The company’s portfolio increasingly includes a number of streaming services, like JioTV, JioCinemas, and JioSaavn (for music), and its e-commerce partnership with another Reliance subsidiary, India’s largest retail chain, JioMart. It has also been developing cloud services to expand its enterprise businesses, quietly making software-as-a-service (SaaS) acquisitions in 2019. But most importantly, the lowering cost of mobile data and the growth of internet users across India in just four short years has allowed Jio to build products for a digital consumer base it helped forge.
“Jio realized the strategy of core connectivity, content, and commerce. This is probably the only telco company, or only tech company for that matter, on the planet that has all three portfolios together,” said Ravi Sharma, an analyst with the International Data Corporation. “It is positioning itself to be a very large consumer tech company.”
Since March, Jio has seen a rush of investment that ballooned to $13 billion in a few short months, led by Facebook’s $5.8 billion, which was soon followed by Silicon Valley’s Silver Lake private equity firm and Saudi Arabia’s sovereign Public Investment Fund, among others. This week, Google announced that it was investing $4.5 billion in Jio Platforms, Reliance’s digital arm.
In an interview in 2017 with The Economic Times, Ambani noted the power of the cheap data he helped create. “The foundation of the fourth industrial revolution is connectivity and data,” he said. “Data is the new natural resource. We are at the beginning of an era where data is the new oil.”
That is telling, coming from a man who made his wealth from petroleum refineries. Most tellingly of all, Ambani has actualized his early ambitions. After less than four years, the global average for 1 gigabyte of data is $5.09. In India, the cost is 18.5 rupees (26 cents) — just shy of that of a deep-fried vada pav.