What Mukesh Ambani did and didn't say about Reliance Jio

On September 1, India's richest man Mukesh Ambani sent shockwaves across the telecom industry. As Ambani announced Reliance Jio's grand plans, the shares of rival companies like Bharti Airtel and Idea Cellular took a beating on the stock market.

But a lesser known fact is that Reliance could not insulate itself from the upheaval that it had unleashed. The company also registered a fall in its share pricing on that very day.

The chairman's speech at the 42nd annual general meeting of Reliance Industries Limited left many Indians excited and confused.

While people were keen on getting access to cheaper data, some questions got stuck in their minds. Is Reliance actually offering cheap data? Will it stick to its promise of never charging for voice calls?

Amid such widespread confusion, a Pakistani newspaper developed some new notions about Ambani. The paper wrongly identified him as the "CEO" of an "upcoming telecommunications company".

The Express Tribune reported, "A 45-minute speech by Mukesh Ambani, the CEO of an upcoming telecommunications company in India, announcing free voice services to its users cost the country's three existing operators an estimated INR 131.66 billion on Thursday." Ambani is chairman and managing director at Reliance Industries Limited (RIL), the parent company of Reliance Jio Infocomm Limited.

By no account can he be described as the CEO of an upcoming telecommunications company because Reliance Jio has a different MD in the first place. His name is Sanjay Mashruwala.

Moreover, Reliance's telecom operations have been around since quite some time. Not "upcoming" in the least bit.

Incidentally, the same Express Tribune story later identified Ambani as the "owner of Reliance Industries - an Indian conglomerate holding company".

Had the newspaper been a bit more diligent, it could have avoided the twin descriptions and stuck solely to the correct one. Nevertheless, we hope that settles the debate around Ambani's designation for The Express Tribune.

However, for those who are still confused about the blockbuster announcements made by Reliance, here's a fact-check of the claims made by Ambani in his speech that rocked the telecom world.

Dedication

Ambani began his speech with a dedication. "Let me begin my words with a dedication. In the journey of time, there comes (sic) a few life changing movements. Our Prime Minister Shri Narendra Modi's inspiring vision of a 'Digital India' is one such movement. Jio is dedicated to realising our prime minister's vision for 1.2 billion Indians," Ambani said.

The following day several newspapers were jacketed with Reliance Jio's advertisements that featured a photograph of Modi.

Many Twitter users complained about Reliance using the PM as a brand ambassador. Even political leaders complained.

No PM in independent India sold himself so brazenly to a corporate house https://t.co/lflf7WooGp

— Arvind Kejriwal (@ArvindKejriwal) September 3, 2016

After PM modelled for Reliance product, wud anyone have courage to take any action against Reliance in any case? https://t.co/sXtXtDgVux

— Arvind Kejriwal (@ArvindKejriwal) September 3, 2016

But the dedication was a clever marketing strategy. Reliance tried to align its corporate interests with national interest. Therefore, Jio was dedicated to Digital India. Factually speaking, Jio is much older than Digital India.

While Digital India was launched on July 2, 2015, Jio has been in the pipeline since long. Infotel Broadband Services Limited, Reliance's Telecom subsidiary, was renamed as Reliance Jio Infocomm Limited in January 2013.

In fact, twenty days before the launch of Digital India, Ambani was speaking at the 41st annual general meeting of RIL on June 12, 2015.

In that speech, Ambani mentioned Jio 78 times. He also mentioned how Jio would help strengthen its e-commerce business.

"With the advanced internet infrastructure built by Jio and a robust physical retail business built by Reliance Retail, we will create a differentiated e-commerce model for India," he said. Much of what Ambani said at the recent AGM was rehashed from the previous one.

"Today, India is ranked 155th in the world for mobile broadband internet access out of 230 countries. Jio is conceived to change this," he said on September 1.

More than one year before at the 41st AGM, he said, "I am confident that Jio will play a significant role in lifting India from its current 142nd Rank on internet penetration to amongst the Top 10 nations in the world."

The writing on the wall is clear. While Jio's core objectives of enhancing internet penetration had been conceived well before, the dedication to Digital India was certainly an afterthought yet a marketing masterstroke.

Also, it would be foolish to believe that the PMO wasn't taken into confidence before releasing Jio advertisements. Narendrabhai was well on board.

Connectivity

One of the foremost claims made at the 42nd AGM was in relation to connectivity and reach. "Today, the Jio's 4G network already covers 18,000 cities and towns, and over two lakh villages. By March 2017, we will cover 90 per cent of India's population," Ambani claimed.

But fourteen-and-a-half months back, the story was not much different. "Jio is now present in all of the 29 states of India, with a direct physical presence in nearly 18,000 cities and towns," Ambani said in June 2015.

"Jio's wireless footprint extends even further and covers over one lakh villages. We are expanding this footprint to cover nearly 80 per cent of India's population by the end of this year," he added.

According to 2001 Census data, India has over six lakh villages. More than 5,90,000 villages are inhabited. In fourteen-and-a-half months, Jio could increase its footprint from "over one lakh villages" to "over two lakh villages".

At such a pace, it is very unlikely that by March 2017, Reliance Jio will even be able to cover two lakh out of the three lakh villages yet to be covered. Therefore, Reliance's claim that Jio will cover 90 per cent of the country's population in the next seven months is questionable.

The other issue pertains to the prospective subscribers of Reliance Jio. "Today, I set a target for team Jio to acquire 100 million customers on Jio network in the shortest possible time and create a new world record," Ambani said with confidence.

However, it may take long before Jio achieves such a feat. As per a report by Morgan Stanley Research, Jio will garner 40 million subscribers in 2017-18.

Goldman Sachs put the figure at 75 million subscribers by fiscal year 2019-20. IDFC Securities also estimated 75-80 million subscribers over the next two-three years.

The market analysts sounded optimistic about Jio's chances but they are certainly not vouching for a number as high as 100 million subscribers in the near future.

Interestingly, China Mobile, the world's biggest mobile network, attained the feat of 100 million 4G subscribers in 14 months. For now, none of the market analysts seem to be suggesting that Reliance will either replicate or topple that record.

Hence, the "new world record" that Jio is eyeing may well never happen.

Affordability

"I believe that these are the absolute lowest data rates anywhere in the world. Jio makes India the highest quality, most affordable data market in the world." This was probably the tallest and most talked about claim that Ambani made at the Reliance AGM.

Most certainly, it is difficult to dispute. South Korea is one country that remains unparalleled in terms of internet connectivity.

They have the fastest average internet speed with over 90 per cent of the country's population having access to the web. Digital Fuel Monitor's statistics point out that 5GB of 4G data in South Korea would cost 38.15 Euros or Rs 2,832.97.

Reliance Jio's M Plan provides 4GB of 4G data at just Rs 499. When compared with South Korea, one gets 1 GB less 4G data at an overall price difference of over Rs 2,000.

In fact, the amount of money that one spends in South Korea to get 5GB of 4G data, the same amount (Rs 2382) plus Rs 117 can get you 35GB of 4G data in India since Reliance Jio XL Plan is offering 35GB at Rs 2,499.

While most Indians may not be able to shell that much money on their internet pack, the number is still significantly lower than South Korea.

At nearly the same price, Jio is offering seven times the amount of data that operators in South Korea offer.

Yet there are a few things that consumers need to watch out for. Firstly, the unlimited 4G data which is on offer during night hours will be limited to a few hours only ie between 2-5am.

Secondly, the additional WiFi data that has been promised can only be accessed through public hotspots of Reliance Jio.

Thirdly, while domestic voice calls are free, international calls aren't. Hence, the claim that Reliance Jio will never charge for voice calls comes with a rider.

Lastly, users will forfeit the unused free benefits at the end of the pack's validity period.

The penultimate question is: will Jio succeed? Only time will tell.

For the moment, one thing to watch out for is how other telecom operators like Bharti Airtel and Idea Cellular will react to Jio. Will it lead to a price war?

Maybe. But Jio won't have an easy ride either. As global news agency Reuters noted, "Jio could make Reliance a big provider of telecoms and internet services across India - a nation of one billion mobile phone subscribers - and is a key plank of Ambani's strategy, even though the business is unlikely to add significantly to group profits anytime soon."

Also read - Jio's free data may not be enough for us