Reliance’s Inexpensive Mobile Service Is Changing India

In 8 years, BYJU’s learning app has evolved from a young startup in 2011 to a corporate worth around $4 billion. But none of this would have happened if it was not for Reliance Jio, an Indian mobile network operator under Reliance Industries.

Before Jio was launched, businesses like BYJU had a lot of difficulties expanding. Now with what Jio has created, everyone could not live without it anymore.

When Reliance first made its appearance in this field, the total income of the whole market decreased by 35% because Jio offered a low price and even free service for half a year. The company was able to sustain for this long because, before Jio, Reliance had already had a solid standing in the energy and petrochemical field and it used the profit from the two sectors to subsidize its mobile services.

Before Jio, Reliance had already had a solid standing in energy and petrochemical field

This might be a bold step for Reliance, but it plays a vital role in boosting the Indian economy, which goes beyond the immediate benefit of Mukesh Ambani and the company’s shareholders.

What Reliance Can Gain

Reliance Industry was passed down to Mukesh Ambani from his father, Dhirubhai Ambani. After two generations, Ambani’s empire has brought massive wealth to the family, making them the richest in the country.

Reliance’s petrochemical business ranks top in the world, but a long time ago, Ambani announced that data was what it had to do next, a projection that turns out to be true today.

The company had a huge advantage to begin with, which was their traditional businesses that generate enough cash-flow to offer an inexpensive price for a large number of users. This act had led to the destruction of smaller firms that drew their capital from bank loans.

After two generations, Ambani’s empire has brought massive wealth to the family

Reliance also made its move at a favorable time when the government decided to decrease the amount of money one company takes from another when its customers switch to the latter’s service. Since Jio had not had time to gain a decent base of users, it would lose more to its rivals than its take from them. But when this new policy took place, the game changed entirely, and Jio suddenly gained more than it lost.

When Jio eliminated smaller rivals, Vodafone and Bharti Airtel were also beneficiaries, so they had no reason to oppose Jio’s act. However, this happy time did not last long as it took Jio no time to lure the other two companies’ subscribers to its side.

Jio posed harm to its rivals in the telecom industry, but it has paved the way for other small-scale companies to bloom.

A company that stands on Jio’s shoulders to reach its current development is Capital Float. The startup provides loans for online merchants as well as their customers. One of their success stories is an online phone dealer working on Amazon. He saw Capital Float’s advertisement on the platform and became a client with a 10 lakh loan. His business has grown fast ever since, and now it is worth ten crores.

Reliance Will Not Take Partner

At the end of the day, Reliance is there to make a profit. Jio supports startups but not for long.

For example, a smaller company came to Reliance Money with a partnership proposal of a lending platform. What the startup got is rejection. Reliance said that if the market had potential, it would do it alone and when it did, it would kill off the small startups.

Rumors about Alibaba Group Holding wanted to buy Reliance Retail’s stake is another prime example. The former giant has already been the leading player in retail, both online and offline. Alibaba’s Hema stores are something Reliance is working on setting up in its home country. Before this piece of news surfaces, Alibaba had been a stakeholder in Indian Paytm Mall, but this was not exactly a successful move for the Chinese e-commerce corporate.

Jio supports startups but only to a certain extent

However, the chances of such cooperation are rather slim as Reliance does not need capital nor Alibaba’s distributing power.

According to Ambani, in the next few years, Reliance’s retail sector will be as profitable as his two traditional businesses, which are energy and petrochemical. In the last financial year, the two industries contributed $66 billion to Reliance’s earning.

Reliance can be even more successful by creating an ecosystem and exploiting the inherent advantage of being a local company. For the time being, the two biggest e-commerce companies in India are under foreign control, which is Walmart and Amazon.

In an attempt to create a more favorable environment and help local merchants compete with overseas corporate, the Indian government laid down protectionist measures, which benefits Reliance the most. This reality speaks volumes of how powerful an effect Ambani has on how the government policies turn out to be.

Reliance is advancing into the media content field, which is a missing piece in Jio’s ecosystem and has a vital role in boosting its development. To realize this next step, he acquired Network 18, which has a diverse portfolio of both entertainment and news shows. Some of them are Nickelodeon, CNBC, and MTV. Last year, he expanded to cable television networks by purchasing stakes from them.

If Japan has the Marunouchi, Mumbai also possesses a similar site called Dalal Street, and recently, it drew the public attention to Zee Entertainment Enterprises’ stakes. The company has sparked quite a lot of debates. Zee’s influence can be seen in music, television, and movie fields. The company’s chairman, Subhash Chandra is using his shares as a guarantee for loans.

Zee Entertainment Enterprises's shares are on offer 

In a business that foreign names used to be dominant in India, Reliance showed up as a big player and continuously on the lookout for new content to feed to its Jio.

Reliance cannot just enter the market without the ones already been there opposing. Vodafone Idea and Bharti Airtel have realized how dangerous Jio is and they are have turned on their fighting mode. That is not all, concerns about net neutrality, and privacy can also hinder Reliance’s expansion in this field.

However, Reliance has a history of successful adaptation to regulation, and their chances of winning are high.