Reliance Jio defies competitors, will not increase 5G tariffs

Reliance Jio has made a contrarian call vis-à-vis competitors by deciding not to raise 5G tariff, which is currently at the same level as 4G, according to a top company executive. While competitors are batting for a rise in rates, Jio is banking on increased data usage to drive revenue. By not imposing any barrier on consumer data usage, the executive said, the company was also following a strategy different from both global and domestic telcos in the 5G space.

The executive added: “More data usage will lead to higher revenues and better average revenue per user (ARPU). Why should we ask consumers to pay more for 5G than 4G? We don’t follow the strategy of fast-moving consumer goods (FMCG) companies, which package and rebrand the same water available at home and charge a premium.”

Reliance Jio’s decision is significant as competitors like Bharti Airtel have publicly called for an increase in 5G tariff.

Explaining Jio’s differentiated strategy, the executive said: “Global and domestic telcos view 5G as just an incremental service over 4G for mobility. We, on the other hand, see it as technology that will bring a quantum leap in connectivity. Our strategy is not focused only on mobility but also on connecting the country’s 330 million homes (100 million in Phase-I) with broadband service using 5G last-mile connectivity. We have been working on the technology for two-three years to make it relevant for India.”

To achieve this objective, the company has made massive investments that are many times higher than those of competitors. “We have heavily invested upfront to roll out 5G across 85 per cent of the country and in over 8,000 census towns, installing 1 million cell sites, compared to 75,000 by competitors. That’s why our significant investments in 5G will be completed by December this year, after which we will make only incremental investments for growth,” he added.

At least 75 million of the company’s 125 million user bases are 5G mobile subscribers. And, it has laid out plans to shift more consumers to the new service. The company executive above said, with 12 million smartphones being sold every month, as many as 240-250 million phones would be sold annually; half of these are 5G devices. Based on existing trends, the company expects to capture a larger share of these customers transitioning from 4G to 5G. “The speed of this transition could be far higher if the prices of 5G phones drop below Rs 10,000, and that is already happening,” he added.

The executive also explained that by establishing a standalone 5G network, the company would be able to slice the spectrum for mobile and home broadband services separately to ensure the quality of service. It would also use an overlay of the 26GHz millimetre band, which it acquired in the auction, to provide services to enterprises and educational institutions requiring speeds over 1 Gbps.

Discussing localisation efforts, the senior executive revealed that the telecom infrastructure, which includes fibre and towers, was already completely localised. In electronics, while the company is importing radios from Ericsson and Nokia, it is also developing its own through Jio Labs, and manufacturing in partnership with Sanmina in India. “We have already developed our own 5G core, which is being tested on over 450 million customers in India, apart from our own 5G radios, billing solution software, and home solutions, which we plan to export to other countries from sometime next year,” he added.

The executive further explained why the company opted for medium earth orbit (MEO) satellites rather than low earth orbit (LEO) satellites for providing satellite broadband services, unlike competitors like OneWeb, controlled by Sunil Mittal. “In MEO, one can cover the world with four to five satellites; in LEO, you require hundreds. The lifespan of an MEO satellite is 20 years, while that of a LEO is four to five years. And MEO offers more bandwidth — up to 1 Gbps, more than LEO, which can go up to 150 Mbps. Thus, the effective cost is superior.”

The executive also mentioned that Jio intended to provide the service only in India and had reserved capacity on partner satellites from SES, based in Luxembourg. The company has already set up an earth station in Cuddapah and is offering services at three locations using spectrum provided on a trial basis by the government. Business Standard