Reliance Jio Infocomm – Data Only Strategy Reaches Small Market Segment

If Reliance Jio Infocomm launches with a data-only dongle priced at ~Rs5,000 (US$91), it could target the high-end subscribers who currently contribute 5% of industry revenues (and hope to win only the data spend of these customers). The total addressable market for RIL Infotel is restricted to ~US$750 mn upon launch share) not big enough to build a business case considering the US$2.5 bn paid for spectrum by the company in 2010.

Addressable market with a data + voice handset strategy
However, by launching a handset [LTE Capable with CSFB] priced at Rs7,500 (US$136), the addressable market upon launch becomes the subscribers who account for 20% of industry revenues worth US$8 bn (and the company has a chance at capturing the entire spend of these customers, including voice). This compares with ~US$4 bn the company may have to spend on 2G and LTE spectrum combined (at the recent price for 2G auctions with full upfront payment). While the business case even here is still not readily visible, it is better than the data-only case above and seems worth a shot.

What could be Reliance Jio Infocomm’s USP ?
Importantly, these voice subscribers will be from the higher-end of the market and are unlikely to be price sensitive. What Reliance Jio can offer to these subscribers will be something which very few other telcos can (actually, just one other telco in each circle) – mobile Internet at unmatched speeds at extremely low cost compared to other options in the market.

The pure voice newcomers have used voice tariff discounting to gain market share. However, RIL Infotel can afford to match the incumbents on voice tariffs, but use high-speed data as a market share gaining tool.