What is the business idea Behind the reliance Jio 4g Network-Revealed
Questions that you will be able to get answers are-
a. How are they offering 4G data at such cheap rates?
b. How are they providing unlimited voice calls (local/STD) free to every JIO customer?
c. How are they offering unlimited 4G data at night?
We have get this from 1 of the answers of Quora.com and we think this is really the correct answer for all the buzz created by the Business Ambani.
It is really simple. Most of you are going to pay the same or probably more money to Jio compared to your current network provider. After reading this answer, you will realize what a clever businessman Mukesh Ambani is.
I have been following the news about Jio since many years, and have written multiple articles about Jio in the past many months.
Why Mukesh Ambani wants to enter networking field so badly?
This story requires us to know why Mukesh Ambani is investing so much in yet another telecom company especially when there is already another company named Reliance Communications. In 2002, when Dhirubhai Ambani died, there were some major ownership issues between his two sons – Anil Ambani & Mukesh Ambani. After some public feud between both the brothers for the control of Reliance empire, their mother intervened and split Reliance into two parts in 2005. Anil Ambani got telecom, power, entertainment and financial services business while Mukesh Ambani received Reliance Industries and IPCL.
Although Anil Ambani got the Reliance Communications, it was Mukesh Ambani who started it and revolutionized the Indian mobile industry by reducing the call rates in the early 2000s, which made mobile phones affordable to Indians. It was his baby all the way, while Anil Ambani was not even having a seat in it’s board of directors.
That is not all. To prevent Mukesh Ambani from making another telecom company and competing with Reliance Communications, they had inserted a non-compete clause in the agreement.
In 2010, as soon as the non-compete agreement was scrapped/expired, Mukesh Ambani bought 96% stake in Infotel Broadband which had won 4G spectrum in all sectors in India. Later they renamed it to Jio, and started building fiber optic network around the country.
This is not just about personal rivalry. With his experience in starting up Reliance communications, Mukesh Ambani knows that existing network providers are not good enough and that he can easily compete with them and win. Telecom is also a very lucrative business. It is like he gets to control Internet/communications in India.
Reliance Jio’s Business Model.
Everything Jio have done till now is intended at making money. Their tariff plans may look unbelievably awesome, but they will make more money by giving free voice calls than what the other companies make by charging you for it!
In India, the monthly average revenue per user (ARPU) the current network providers get is around Rs 150 per month. That is the money they get on average from each user. If you spend over Rs250 per month, you are considered a high value customer.
Look at this tariff plan.
Which plan would you choose? If you are a voice-only kind of person, then you would be okay with the Rs 149 per 28 days plan, as you will get free unlimited voice calls. But, even though you are not explicitly paying for voice, you are already paying over Rs 150 per month, thus their ARPU will by default be as good as the current players.
If you are someone who uses over Rs 150 worth of voice calls every month then it is a totally awesome plan for you. But, my point is that other telecom companies make about Rs 150 per month on average from each user by charging for voice, SMS, data and roaming. Jio will be making the same/more amount of money on average from each user even after providing SMS, roaming and voice calls for free, by just pricing things differently.
Now, if you are a moderately data using person, which plan would you choose? Did you see that there is no plan in-between the Rs 149 and Rs 499 plans? This is basically a psychological trick to get you into the Rs 499 plan. Many people will compare it with the smaller plan and see that you are getting Unlimited 4G night data and choose atleast the 499 plan.
They do have some smaller plans at Rs 19, 199 and 299, but these plans do not really offer any more value than their main plans as they have even less validity. Also, it offers less data per rupee. For example the 299 plan only offers 21 day validity and 2GB data. This may be adequate for many people, but if you ever exceed the 2GB limit, then you will have to purchase ‘addon packs’ and these addon pack will have the validity of the main pack. So, if you recharge on day 20 of this plan, then you will get only one day validity for the addon. For practical purposes, you will be spending more for lesser value through these packs. The Rs19 pack maybe useful for those who want to use some internet & voice calling once in a while.