JIOEFFECT: Driven By Data

Consider this. At the end of 2019, the monthly data consumption by India’s nearly 600 million subscribers on average stood at 11GB driven by 4G, having doubled in just one year. The average consumer was also spending more than 70 minutes every day on his/her favourite OTT platform. The number of Voice over LTE (VoLTE)-enabled smartphones grew to 432 million, while broadband penetration stood at 47 per cent. But most importantly, Indians were paying just about Rs 7 per GB for data, one of the lowest cost in the world.

Let’s fast forward into the future. By 2023-24, the average monthly data consumption is expected to exceed 50 GB, and content consumption via OTT platforms is likely to be 300 minutes per day thanks to a host of services becoming available online such as education, shopping, tour & travel, virtual healthcare and what have you. The all-round increase would be on account of 5G rollout, further penetration of 4G services, and more than 80 per cent broadband penetration.

All this could be a reality soon. The recent announcements of investments in Jio Platforms mark the beginning of all this, say experts. More deals are on the anvil and across companies.
Jio Platforms has so far raised a whopping Rs 104,327 crore from nine leading global investors (at the time of filing this report), who have bet big on Jio and Reliance Industries, its parent. And why not? After all some of these investments are the largest in this space, till date.

“Few companies have the potential to transform a country’s digital ecosystem the way Jio Platforms is doing in India, and potentially worldwide,” said Henry Kravis, Co-founder and Co-CEO of KKR at the time of investing Rs 11,367 crore for a 2.32 per cent stake in Jio Platforms, its largest investment in Asia till date. A detailed set of questions seeking inputs on benefits to the consumer from Jio remained unanswered at the time of filing this story.

Different Takes
Those who watch the telecommunication space have offered mixed reactions to the mega deals. Some even declined to comment citing conflict of interest, etc. “The investments in Jio are certainly good for the consumers provided they are used in expanding the network and its capacity. More money makes it easier and viable for a telco to expand 4G network coverage and improve data speeds,” says Mahesh Uppal, Director, ComFirst, a communications consultancy firm.

Echoes Sathish Gopalaiah, Partner, Deloitte India: “With increase in work-from-home and the need for more digital products, these investments will aid the Indian consumer with access to more platforms and digital ecosystem.”

Indeed, the sector dynamics have changed with the entry of Jio. In the pre-Jio times, telcos would earn 75 per cent of the revenues from voice, while data including VAS made up just 25 per cent. “This has fundamentally changed. Now, for Jio and some other operators, who have VoLTE / WoWiFi available, its 100 per cent data revenue as voice is also through IP,” says Faisal Kawoosa, Founder & Chief Analyst, techARC (technology analytics and insights firm).

So while the entry of Jio has shifted the focus to data, not everything can be said to have changed for the better. Uppal says that while Jio has managed to ramp up its consumer base in the past four years, the quality consumer (with better average revenue per user or ARPU) is still with rivals like Airtel, Vodafone-Idea. That is one view that resonates with other telecom experts.
“Clearly, the entry of Jio has led to a churn in the Indian telecom industry. The industry was already under stress, reeling from a high capital cost, reducing ARPU and regulatory challenges. The entry of Jio, with a predatory pricing, has put further pressures on an already stressed industry. Did it improve the quality of service? Clearly, that is not the case as each of us can vouch for,” says Jaijit Bhattacharya, President, Centre for Digital Economy Policy Research (C-DEP), an independent think tank that formulates positions on policies for the digital economy.

“Has the entry of Jio put pressure on the incumbent players to improve their quality of service? No, that does not seem to have happened either. Before Jio, it was virtually a duopoly between Bharti Airtel and Vodafone Idea. It seems that even after the entry of Jio, it will still be a duopoly if Vodafone is not able to survive the bleeding it is facing,” adds Bhattacharya.

So how do experts see these big-ticket investments in Jio impacting the customer? “Overall, for consumers, it will mean better quality of Internet at faster speed. Will that happen tomorrow? I don’t think so. But capital certainly arms a player to take decisions on expansion and faster data connectivity,” says Uppal.

Kawoosa sees an overall gain for the consumer. “Overall, I see it as a gain. Only after Jio, the consumer has actually been able to leverage data empowerment,” he says. “If we look at present times, had Jio not been in the picture, we would not have been able to work from home as we are doing at present,” says Kawoosa. Why? Because fixed line broadband penetration is still very minimal. “We have just around 20 million fixed line broadband users, while with Jio, followed by competition, we have over 450 million broadband wireless users,” he points out.  

Decoding Investment
The first to jump onto the Jio bandwagon was Facebook, the world’s largest social media platform. Of the total investment of Rs 104,327 crore in Jio (at the time of filing this report), 41.76 per cent or roughly Rs 43,574 crore ($5.7 billion) came from Facebook alone, for a 9.99 per cent stake in JPL. Facebook gets a seat on the board of Jio Platforms, along with that of an observer.

“The investments by each investor have been against a non-significant minority stake. Therefore, reading too much into it from a strategic perspective would perhaps be an over-reading of the matter,” says Bhattacharya. “There have been speculation that Facebook will use this relationship to bring back its ‘Free Basics’ and disrupt Net Neutrality or it will use the Jio relationship to push for allowing WhatsApp to launch its payments quicker and so on. However, Jio and WhatsApp Pay will be competitors and Jio will be a super-ecosystem that will dominate the digital space in all its manifestation, including digital health digital payments, digital insurance, social media etc.,” he adds.

Clearly, Jio is the biggest startup on this planet that is expected to grow at a scorching pace. It makes a good stock to buy for all the investors. Does that mean that Jio will become a better brand and provide better service? “Brand has many components and clearly, the investor community has the least impact on a brand. Similarly, the type of investors does not lead to a better or worse service for the consumers. We will have to wait and watch what kind of brand Jio evolves into,” says Bhattacharya.

Uppal has a slightly different take on the impact these big-ticket investments may have on the overall ecosystem. “Investments into one player puts pressure on the rest. But it also makes other players attractive for investors. After all, the older players have better quality of customers,” says Uppal. Perhaps he is referring to a higher ARPU of Airtel on a comparative basis. Certainly if news reports are to be believed, e-commerce giant Amazon could be exploring a mega investment in Bharti Airtel for a minority stake. Amazon has already invested $6.5 billion in the Indian e-commerce ecosystem and continues to bet big on the massive business potential of Indian consumers.  

So what does the Facebook deal mean for the consumer? Will data prices go up or down, going forward? Will Facebook be more favourable to Jio at the cost of other service providers?
“Facebook does get a place on the board. It recognizes the fact that content and carriage go well together but telecos, by and large, do not want an exclusive deal,” says Uppal. “It makes little sense for any international content company to strike an exclusive deal with only one player when its business is carried across all networks. For example: I don’t see any incentive for Netflix to be partial to say an Airtel or a Jio. After all, these are international players doing business all over the world,” Uppal adds.

Bhattacharya does not see any inherent gain for Facebook or WhatsApp. “I do not see any inherent gain for Facebook and Whatsapp if they follow the law of the land that includes sticking to Net Neutrality and the Competition Commission regulations as well as the provisions pending in the Personal Data Privacy Bill. As I mentioned earlier, both Facebook and WhatsApp will be competitors to the Jio ecosystem. Jio obviously gains precious cash that it would need to be able to grow faster,” he adds.

What about data prices? “I don’t think prices will go significantly up. Yes, in due course we may have to pay more, or in other words, we may get less for the same price,” says Kawoosa. Whatever may be the case, the customer will continue to be the king, at least when it comes to speedy data and related services.