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Reliance Jio nears apex of India's mobile market in just 3 years

Carrier on pace to top Vodafone India as it lures subscribers with rock-bottom prices

A woman walks past a mobile store of Reliance Industries' Jio telecom unit in Mumbai.   © Reuters

MUMBAI -- Reliance Industries is set to become the leading carrier in the world's second-biggest wireless market just three years after its debut, disrupting the industry in India by offering pricing so low it put smartphones in the hands of low-income and rural communities.

Mobile unit Reliance Jio Infocomm has grown its market share to 29% and continues to lure subscribers away from its main rivals, market leader Vodafone Idea and No. 3 Bharti Airtel. At the current pace, Jio is set to surpass Vodafone Idea within the year to become the top player by subscriber base.

With its low prices, Jio has brought high-speed mobile service to a larger swath of the market. This has connected more consumers to services like e-commerce and video streaming, furthering Reliance Industries Chairman Mukesh Ambani's ambition of dominating India's burgeoning data economy.

Although a relative latecomer to the market, Jio quickly racked up subscribers with limited-time offers of free voice and data service, and expanded its base through low prices. The gap between Vodafone Idea and Jio has narrowed to 40 million subscribers from nearly 200 million last fall, and both Vodafone Idea and Bharti are losing customers while Jio is logging net gains.

The market has gone through a major realignment since Jio entered in September 2016. Bharti, which previously led the pack, has acquired the Indian arm of Norway's Telenor and telecommunications operations from Tata Group, the country's largest conglomerate. No. 2 Vodafone merged with third-place Idea Cellular in August 2018.

Other carriers have been forced to bow out. Reliance Communications, once India's second-largest carrier, floundered under a heavy debt load as price competition intensified and ultimately filed for bankruptcy this year. The rivalry between Jio and RCom was also a dramatic family feud, as RCom is run by Ambani's younger brother.

A field that numbered 12 at the end of 2016 has been whittled down to essentially just three. Yet the price war rages on.

Bharti's average monthly revenue per user, or ARPU, has dropped 31% over three years to 129 rupees ($1.81) in the April-June quarter. Vodafone Idea's has sunk to 108 rupees, down 17% over the same period compared with the performance of the former Idea Cellular. Earnings at both companies have been lackluster.

Jio's ARPU is also down, shrinking just 9% on the year, but its expanding subscriber base has made up for the decline, allowing the carrier's profits to grow.

A store in Mumbai offering the Jio Phone from Reliance Jio Infocomm. (Photo by Akira Hayakawa)

The deep pockets of parent Reliance Industries have allowed Jio to fight this war of attrition. The oil-to-retail conglomerate reported a net profit of 395.88 billion rupees ($5.55 billion) last fiscal year, the largest of any Indian company, and has poured earnings from its mainstay oil operations into its telecommunications venture.

But Reliance held nearly 3 trillion rupees in interest-bearing debt at the end of March 2019, representing a 60% increase in three years. This stems partly from its foray into wireless, along with major oil-related investments and an expansion of its retail business.

Reliance announced a deal in August to sell a 20% stake in its oil business to Saudi Aramco for $15 billion, which would help shore up its finances. It is likely to keep Jio's prices low as it chases its goal of 500 million subscribers.

The carrier's Jio Phone has proved a potent tool for attracting otherwise difficult-to-reach consumers. The feature-light handset is essentially free with a cheap wireless plan, helping it make inroads into low-income and rural communities.

Jio has accelerated the spread of fourth-generation wireless service in India, according to Credit Suisse. Widespread use of budget smartphones and faster data connections have drawn more people into the online economy, sharply expanding the market for such services as e-commerce, video streaming and mobile payments -- areas on which Reliance has set its sights.

Ambani's ambitions center on data. His conglomerate is leveraging big data to bring together physical retail and e-commerce, and to venture into such fields as finance and cloud services, in pursuit of supremacy in India's data economy.

Additional reporting by Nikkei editorial assistant Ojaswi Rao.

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