INDIAN TELECOM & RELIANCE JIO

Prof SUJIT KUMAR

PGPM, IIML
FEBRUARY 28, March 1 2019
RELIANCE JIO
 Structure
• Entry Strategy – 2016
• Go back in time - Questions for Core Team @ Reliance
Industries
• Critical questioning & System thinking during 2005-10
• Insights
• Core competence
• Creative Thinking & Deep Insight leading to Strategy
Formulation
• Implementation & Outcomes
• Creative Thinking & Imagining the Future
ENTRY STRATEGY ?
 Entry Strategy – 2016
• PRODUCT & SERVICE : (i) TRIPLE PLAY - VOICE, DATA, VIDEO;
(ii) BOOTSTRAP DESIGNED JIO PHONE-FEATURE, SMART
(iii) APPS

• PRICE : (i) FREE VOICE, DATA AGGRESSIVELY PRICED

(ii) AGGRESSIVELY PRICED HANDSET, DEPOSIT SCHEME

• PLACE : (i) PAN INDIA; (ii) RELIANCE RETAIL

• PROMOTION : SRK

• PEOPLE : THE TEAM @ DAKC TC 22

• PROCESS : INTELLIGENT ONBOARDING

• PHYSICAL EVIDENCE : PAN INDIA VOLTE SPECTRUM & FIRST EVER,

GREENFIELD, IP INFRASTRUCTURE IN THE WORLD BY A
NON TELCO
Reimagining the birth of JIO- ???
 Reimagining the birth of Reliance JIO….2005 ?

IN 2010, RIL PAID $ 3.7 Bn FOR 20 MHz LTE SPECTRUM !

THE STRATEGIC THINKING, STRATEGY FORMULATION &

PLANNING PROCESS STARTED AROUND 2005 AND GATHERED
MOMENTUM AROUND 2007-8 !!!

LTE – Long Term Evolution ( 10x the speed of 3G on mobile networks )

INITIAL CRITICAL QUESTIONS FOR THE CORE TEAM
 Initial Critical Questions for Core Team ?
• Should the Telecom Sector be • Degrees of uncertainty
entered ? ( Oil being a sunset
industry ) associated with the
scenarios ?
• Will it be profitable enough ?
• Possible Disruptions ?
• How much investment would
it take ? Pay Back ?
• Possible to become Numero
• What would the key success Uno ?
factors be ? Key Challenges ?

• Favourable Trends / Scenarios • Possible to retain leadership

?
for a few generations ?
FRAMING OF THE CHALLENGE ?
 The Challenge- Framing & Reframing
• In what ways can I enter the Telecom Sector ?

• In what ways can I enter the Telecom Sector profitably

?

• In what ways can I enter the Telecom Sector profitably

and dominate it ?

• In what ways can I future proof my profitable and

dominant status in the Telecom Sector ?

• In what ways can I leave behind a legacy for

subsequent generations of my family and customers ?
 STRATEGIC THINKING : ANALYTICAL & CREATIVE
CRITICAL
DRILL
DOWN/BROA IMAGINE !
DENING
?S
FRAME/
UNDERSTANDING REFRAME DEEP SCENARIO
& INTERPRETING CHALLEN INSIG PLANNING & THE FUTURE
THE PRESENT GE HT CHOICES

BIASES & PERCEPTIONS

PERSPEC
TIVES
CRITICAL
DRILL
DOWN/BROAD UNDERSTANDING &
ENING INTERPRETING TRENDS &
?S OPPORTUNITIES
PESTLE ANALYSIS
 External Environment – Political / Regulatory

• Liberalized FDI

• Tariff Policy – Migration to Revenue Share

• Licensing Policies – Multiple # of Operators per Circle

• Spectrum Allocation & Sharing – Caps, Share, Sale & Transfer

• Voice would not be permitted on non Telco networks

• Telcos would be allowed to do triple play ( voice, data,video )

CRITICAL ROLE OF THE REGULATORY ENVIRONMENT

 External Environment – Economic

• Increased GDP / Per Capita / Disposable Income

• Growth of Service Industry

• Broadband Ecosystem…E Gov, E Com, E Enterprise, E

Education, E Health

• Favorable Investment Climate

COMMUNICATION BEING AN ONGOING NEED

 External Environment – Social
• Changing Lifestyles – Role of Social Media

• Demographic Profile- Popn Growth, Age Distribution

• Information Access

• Just as “ India in the world “ so “ Bharat within India”

• Infocomm experience

GROWTH OVER THE LONG HAUL & FORMS OF COMMUNICATION

CHANGING OVERTIME
 External Environment – Technology
• 3G, 4G, 5G – increasing efficiency and capability

• Smartphones – Blackberry, Nokia Communicator, iPhone ( 2007 ),

Android ( 2008 )

• Apps

• Capital Expenditure

• Concerns about ROI

• Data Centres

• IPTV
CONTINUOUSLY EVOLVING & MORPHING
 External Environment – Ecology

• Risks of Radiation

• Reducing Travel

WILL CONTINUE TO SHAPE UNDERLYING COMMUNICATION

TECHNOLOGY
 External Environment – Legal

• DOT

• TRAI and TDSAT

• COMPETITION COMMISSION
PORTER’s FIVE FORCES
 PORTER’s FIVE FORCES

• Threat of New Entrants : Low ?

• Power of Suppliers : Low

• Power of Buyers : Medium

• Threat of Substitutes : Moderate ?

• Threat from Competition : High

MECE ISSUE TREE
 # of operators /circle

Licensing Fees – Fixed ....Rev Share

Spectrum – Availability & Cost – Sale Creative
Regulatory
FDI Technique -
Perspectives
Portability
– Parts
Network

Technology Spectrum Utilisation

McKinsey’s
Consumer Device MECE Issue
Tree
Urban / Rural

THE The Increasing Ability to Pay

QUESTIONS Consumer #s
Device – Feature/ Smart

Service – Voice / Data

Voice/Vol-Price
The
Product Data/Vol-Price

# of operators / circle
Technology
Competition
Spectrum

Financials / Investments/Leverage
 # of operators /circle • Increasing
Licensing Fees – Fixed ....Rev Share
Spectrum – Availability & Cost – Sale • Rev share and
Regulatory
FDI
dipping %
Portability
• Increased availability
Network of spectrum , higher
Spectrum Utilisation
cost
Technology
• Increasing % of FDI
Consumer Device • Portability...also
roaming charges
disappearing
THE
QUESTIONS

• Increasingly
complex.2G/CDMA/3G..
.4G
• Increasing
efficiency...more
bandwidth at lower
cost..

• Cheaper feature
phones...sophisticated
smart phones
 • Growth in urban
followed by increasing
rural penetration

• Very high vol share with

low rev share....80-20
applicable

• Very high feature phone

base with sharp growth in
smart phones overtime

Urban / Rural

THE The Increasing Ability to Pay

QUESTIONS Consumer #s
Device – Feature/ Smart
• Initial big growth in
voice foll by exponential
Service – Voice / Data growth in data in later
years
Voice/Vol-Price
The
Product Data/Vol-Price

• Steady drop in voice

price/min...

• Steady increase in data

vol / variety and ARPU
 • Increasing

• 2G/CDMA/3G....4G

• Top operators
THE holding more
QUESTIONS spectrum

• Very attractive for

several years...30-
40%
EBITDA...continuous
# of operators / circle capex...highly
Technology
leveraged....voice
Competition accounting for 85%
Spectrum
of revenue
Financials / Investments/Leverage
 Hypothesis/Insights
• Mobile service is aspirational for Bharat

• Aggressive pricing of service and handset likely to enable it

• Pan India need / opportunity

• Data will be increasingly in demand

• E Com, vernacular content / apps , entertainment, e

education, e governance likely to drive it

• Incumbents’ P&L likely to be voice centric

• Incumbents’ BS likely to be debt heavy

VRIO FRAMEWORK
Resource/ Valuable ? Rare ? Difficult to Firm Competitiv
Capability imitate ? organized e
to capture Implication
value ? ?

Product & Yes Yes No Yes

Service
Offerings

Brand Yes No Yes Yes

Value

Asset Yes Yes Yes Yes

leverage

Financial Yes No No Yes

leverage

Strong Yes No No Yes

Mgmt
Team

Innovative Yes No Yes Yes

culture
Spectrum Yes Yes Yes Yes
Availability
CORE COMPETENCE
 Core Competence & Capability

• Complex Project Management

• Large Scale Capital Generation & Deployment

• Management of the Regulatory Environment

• Brand
SCENARIO DEVELOPMENT
Next Steps in Scenario Development & Strategic
Thinking………Based on Trends

• Financial Models with varying assumptions

• Determine the chink in competitive armor

• Develop a deep insight for own strategy

 Approach to Financial Model
• Years • Cost :
- Spectrum
• Revenue : - Licence Fee
- Marketing
- Population- Total, Urban / Rural, - People
Growth , - G&A

SEC Distribution , Adoption of mob • Investment :

- Spectrum
telephony - Infrastructure
- Phone ownership – Pricing, Feature /
Smart • Capital Structure & Financial Costs :
- Equity
- Usage – Pricing, Voice / Data - Debt
- Interest
CHINKS IN COMPETITIVE ARMOUR
 Chinks in Competitive Armor

• Projected Competitive Financials & capital Structures

• Drivers of revenue

• Pricing structure which will threaten viability ;

Marginal Cost

• Drivers of consolidation
 STRATEGIC THINKING : ANALYTICAL & CREATIVE
CRITICAL
DRILL
DOWN/BROA IMAGINE !
DENING
?S
FRAME/
UNDERSTANDING REFRAME DEEP SCENARIO
& INTERPRETING CHALLEN INSIG PLANNING & THE FUTURE
THE PRESENT GE HT CHOICES

BIASES & PERCEPTIONS

PERSPEC
TIVES
CRITICAL
DRILL
DOWN/BROAD UNDERSTANDING &
ENING INTERPRETING TRENDS &
?S OPPORTUNITIES
 Reframing of the Challenge

• In what ways to achieve an acceptable financial

profile while creating stress for competition and
forcing consolidation ?

• In what ways to generate other near immediate

and sizable sources of revenue riding on the same
infrastructure ?

• In what ways is the Profit Pool likely to be

redistributed ?
 Rel JIO STRATEGY
• The Technology

• The Network

• Cheap devices

• Large family of apps

• Low tariffs
 Strategy Implementation at JIO
• JIO HQ in Navi Mumbai – Building TC 22

• MDA’s office is on the 7th Floor- 4’ wide, bare and with a telephone on it

• One among 200 other workstations on the floor.

• MDA spends a couple of hours every Wed at this office.

• No hierarchy…totally flat.

• Behaving like a start up.

• First Telco to develop a 4G network ( and 5G ready ) , primarily focused on

Data, including voice calls as Data. In a country which, in 2011, was beginning
to embrace 3G…and where customers were being onboarded for net access
on 2G/2.5G !!

• No domestic talent !!!

 Implementation….contd
• JIO sees itself in the digital business, not a Telco.

• Most of its people are in their 20s and 30s.

• Staff is pushed to DISRUPT every aspect of a Telco’s

operations…the network, building security systems, devices,
branding, consumer behaviour etc.

• Loads of Expats.

• Expats hired over the last 7 years personally by MDA and his
lieutenants…globally and from across industries.
 Implementation….contd
• Reiner Deutschmann : Chief
Product & Innovation
Officer…from Deutsche Telekom.
• Mathew Oommen : heads
Networks…former CTO, Sprint.
One of the top 5 in the world in
network technologies.
• Stratos Davlos : heads Platform &
Engg…from Apple. Instrumental
in developing Hello JIO voicebot.
• Tareq Amin : leads Tech
Development & Automation.
• Caroline Seifert, followed by
Janina Anjuli Schmidt : Chief
Brand & Design Officer.
• Shuming Li : looks after
JIO’s Wi-Fi rollouts.
• Marcus Brackebusch : one
of the brains behind
Platforms & Systems.
• Nikola Sucevic : leads Data
Analytics Development in
area of radio coverage and
capacity, machine learning,
and telecom data mining.
• Many others at a variety of
levels, reporting directly to
MDA.
• MDA & Manoj Modi worked
as HR managers !
 Implementation…contd
• Network :
- Spectrum efficiency, Voice as Data, occupies only 10-15% of
bandwidth instead of 50-60% on rival LTE networks ;
- the cost of servicing data & calls is 8p / min on JIO’s IP based
network instead of 30p/min on rival networks.

• LYF Smartphone & JIO feature phone : design and

sourcing….Rs 4000 and Rs 2500 !

• Apps

• Network rollout : size, scale and speed was unprecedented.

 Emerging Sustainable 4 Operator Scenario
• AIRTEL ( incl Telenor , Tata Tele)

• Idea-Vodafone

• Reliance JIO

• BSNL, MTNL

• Understanding incumbent behavior ???

 STRATEGIC THINKING : ANALYTICAL & CREATIVE
CRITICAL
DRILL
DOWN/BROA IMAGINE !
DENING
?S
FRAME/
UNDERSTANDING REFRAME DEEP SCENARIO
& INTERPRETING CHALLEN INSIG PLANNING & THE FUTURE
THE PRESENT GE HT CHOICES

BIASES & PERCEPTIONS

PERSPEC
TIVES
CRITICAL
DRILL
DOWN/BROAD UNDERSTANDING &
ENING INTERPRETING TRENDS &
?S OPPORTUNITIES
 Imagining the Future

• In what ways to generate other near

immediate and sizable sources of revenue
riding on the same infrastructure ?

• In what ways is the Profit Pool likely to be

redistributed ?
 The Way Forward

• Provide end to end solution – pipe, device,

content, portal, digital services

• Extend to an adjacent service –

entertainment, e commerce etc

• Generate revenue from providing connectivity

– to IoT , Smart Homes, Smart Cities etc
 REL JIO : Growth Strategy ( Ansoff )
• Digital Entertainment

• Digital Commerce / Retail

• Digital Currency

• JIO Drive

• Digital Education

• Digital Healthcare
 The Big Picture
• The Emerging Playfield

• New Competitors

• New Competencies

• New Partnerships
POSSIBLE VISION & MISSION STATEMENTS
VISION : Straddle the Digital Ecosystem with the
mindset of a startup and a leader, continuously
developing necessary competencies in a
collaborative mode, and cater to growing and
emerging needs of generations of consumers

MISSION : Assume and maintain leadership ; Develop

and maintain a state of the art and forward looking
communication infrastructure, lead the provision of
cost effective and innovative digital services.
What is it that is not possible today which, if it
were possible, would transform ……?
 WIP Tech Developments

• Latency : 3G- 100ms, 4G- 50 ms, 5G – 1ms

• Download Speed : 4G – 10X 3G, 5G – 66X 4G

• Democratisation of Cloud, ML, AI

• IOT Ecosystem

• Enhanced Security and Data Protection

• Post Device Era

THANK YOU