C&B Notes

4G Transformation in India

Late last year and early this year, we shared two C&B Notes about the emerging internet user in developing economies and their apps/tools of choice, with a particular focus on India.  The delivery of a near-seamless internet experience on slow mobile networks is a focus of these articles, yet this constraint is quickly changing in India.  Billionaire Mukesh Ambani’s Reliance Industries — through its Jio Infocomm business — has, in short order, made enormous strides in delivering 4G internet service in the country.

India’s richest man is catapulting hundreds of millions of poor people straight into the mobile internet age.  Mukesh Ambani, head of Reliance Industries, one of India’s largest conglomerates, has shelled out $35 billion of the company’s money to blanket the South Asian nation with its first all-4G network.  By offering free calls and data for pennies, the telecom latecomer has upended the industry, setting off a cheap internet tsunami that is opening the market of 1.3 billion people to global tech and retailing titans.  The unknown factor:  Can Reliance reap profits itself after unleashing a cutthroat price war?  Analysts say the company’s ultimate plan, after connecting the masses, is to use the platform to sell content, financial services and advertising.  It could also recoup its massive investment in the years to come by charging for high-speed broadband to consumers’ homes and connections for various businesses, according to a person familiar with the matter.

There are 390 million internet users in India, according to Bain & Co., but the penetration rate is still only 28%, compared with 88% in the U.S.  The country’s e-commerce market is expected to be worth $33 billion this year, three times what it was in 2015, but less than 3% of India’s overall retail market, according to research firm eMarketer.  Companies are after customers like 59-year-old potato farmer Govind Singh Panwar.  His home in the Himalayan foothills is built of mud and stone, and his village has no paved roads or indoor plumbing.  Still, broadband internet has arrived. “I bought our first fridge” online, Mr. Panwar said.  “It’s a rare thing in a village.” He got online last year with Reliance Jio Infocomm Ltd., Mr. Ambani’s telecom company, which built a tower nearby that beams his phone nearly unlimited 4G data for about $2.10 a month.

Jio, which means “to live” in Hindi, has signed up 215 million subscribers since it went live in 2016, making it India’s No. 4 mobile provider, after Bharti Airtel Ltd. , with 345 million, Vodafone Group PLC and Idea Cellular Ltd.  Mr. Ambani’s foray started in 2010, when he bought a company that had just acquired a pan-India 4G license.  That was a risky move at a time when fewer than one in 10 Indians were online.  Airtel and Vodafone were still focused on rolling out 3G services, and few Indians owned 4G-capable smartphones.  Fourth generation, or 4G, networks provide significantly faster speeds than 3G, enabling more content like streaming video and music.  They also provide the steadier connections important for online shopping, which can be difficult on patchy networks.  4G networks are common in the U.S., Europe and East Asia.

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Some rivals began rolling out 4G services in some cities, but Mr. Ambani wanted to build a network that would also cover more than 18,000 cities and towns and 200,000 villages, touching some places that didn’t have electricity yet.  That required more than 200,000 cell towers and 150,000 miles of high-tech fiber-optic cable, enough to encircle the Earth six times, according to the company and people familiar with the matter.  The construction is essentially complete.  Wading through India’s infamous red tape required as much time as the physical infrastructure.  To protect its sprawling web of cables, Reliance hired a national network of ex-army staff to look after its lines.  It left a few feet of spare cable coiled on top of manhole covers to show thieves looking for copper that the mostly plastic materials weren’t worth pulling out, and local people were paid to keep an eye out for any problems.

At the launch of service in September 2016, Jio made phone calls and text messages free for subscribers, and made unlimited data free for the first three months, eventually extending it to six months.  After that, Jio’s data price would be a quarter the industry average…The result has been a data binge.  Jio transmitted more data in the first year of its operation than any carrier ever world-wide, according to research firm Strategy Analytics.  India last year surpassed the U.S. in the number of apps downloaded from the Google Play store, according to mobile-app analytics firm App Annie.  Monthly data traffic in India per user has jumped 570% in the two years since Jio launched, according to Morgan Stanley.  When Jio realized it was reaching the consumers who could afford the data but not the 4G-enabled smartphones, it built a new type of “smart” feature phone that worked on 4G and had some smartphone features.  Consumers could own a JioPhone for a $23 security deposit —                                                                                                 refundable if they return the phone. It launched in September 2017 and has overtaken Samsung Electronics Co. to capture 47% of the feature phone market, according to research firm Counterpoint.

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