On Cusp of Data Revolution


Through Reliance Jio phone, Mukesh Ambani is doing for the poor of India what Steve Jobs did for the rich of America through Apple


When you see a revolution brushing against your shoulder, can you recognize its face? That is a rhetorical question that sprang to me as Mukesh Ambani unveiled the Jio Phone at the annual general meeting of Reliance Industries Ltd (RIL) last fortnight.

The more-or-less free smart-like feature phone is revolutionary no doubt, both in the way it courts the masses and in the way it shifts business models in the ICE (information, communication, entertainment) industry.

In a sense, digital technology watchers knew about 20 years ago that this day would come, but few would have guessed the exact time, place and manner it happened as the RIL chairman unveiled the phone bound to grab big headlines for its zero-pricing (not without its fine print).

Technology leader and the planet’s most successful venture capitalist, Vinod Khosla, is believed to have said in the 1990s: “The digital economy will BEGIN to happen when the bits are for free.”

We are not quite there but the pricing of a close-to-free device, free-voice and highly affordable data plan in the world’s fastest growing major economy and the second most populous nation puts Reliance Industries in a historic league going beyond profit and shareholder value.

Somewhere up there, the late founder of Reliance, Dhirubhai Ambani, must be smiling. The story goes that one key advice that he gave to Mukesh before his passing in 2002 was to keep at least 20 percent of India’s population engaged for RIL to sustain the high growth it was delivering to its shareholders. And the bottom of the telecom pyramid is making it happen for Mukesh.

Writing in “Millions Mutinies Now,” Nobel laureate VS Naipaul discussed how the late Dhirubhai brought clothing to India’s millions by betting on polyester that “lasts and lasts and lasts.” Dewang Mehta, the late president of the National Association of Software and Service Companies (Nasscom) spoke of how India’s basic needs (food, clothing and shelter) had expanded to become “Roti, Kapda, Makan, Bijli aur Bandwidth.”

In the generational transition of RIL, the company is now shifting from “kapda” (clothing) to bandwidth (data), having plumbed in the middle of the Bay of Bengal seas to dig for oil that approximates for Bijli (electricity) as an energy source. If you are still measuring RIL’s petroleum refining margins to see if it is a winner, you are missing the point on the future.

If you want RIL’s dramatized unveiling of the Jio Phone to shareholders and the country in one sentence it is this: What Steve Jobs did for America’s rich, Mukesh Ambani is doing for India’s poor.

Nokia ushered in the smartphone. BlackBerry made it corporate. Jobs-led Apple changed the ecosystem with a platform that made third-party developers drive the device through numerous services. South Korea’s Samsung and China’s Xiaomi and Huwaei made it all affordable to Asians. Mukesh Ambani is now bundling, in his words, “connectivity, data affordability and device affordability” together with price plans that woo the bottom of the pyramid in terms they can relate to easily.

Commentators will no doubt calculate interest rates and hidden pricing in the 3-year, Rs 1,500 refundable deposit that the Jio Phone entails. But the real deal is the back-end where RIL is quietly becoming a media company to buttress its hold on e-commerce through Reliance Retail and how it will make bankers, investors and overseas bond markets will respond to the plan.

The bonus share issue that RIL will ensure that domestic investors will also be tempted to stay with the giant in the course of its shift from free-led market share to profitability over a period of time. Ambani has thus bought significant time for financial engineering to sustain the audacious growth gambit.

It is symbolic and significant that RIL invested in Ekta Kapoor-led Balaji Telefilms a day before the AGM. Between video, Reliance Retail, the Jio Phone and the Reliance Jio’s affordable service packs, RIL is now straddling the three big Cs of the digital economy: Content, Community and Commerce.

Now, with 100 million paying customers who will pay anything between Rs 153 and Rs 309 a month in most cases, if you take a back-of-the-envelope figure of Rs 250 for 100 million customers, RIL will get revenues of Rs 2,500 crore a month, not counting revenues from synergistic aligned businesses such as content and retail. That kind of cash flow would make it easy for RIL to raise loans in international markets at cheap rates. Watch this space.

The problem? Think regulation. Think quality of service.

The sweet spot for Mukesh Ambani is that unlike those who rushed in to build 2G networks, he has not splurged on spectrum and is betting on a complex bundling of services to build profits. He has also gained from a whole range of apps and services that have hit the markets over the past decades for him to simply leapfrog into the bundling game.

The current battle in the Telecom Regulatory Authority of India (Trai) signal a challenging road ahead because the 2G-driven incumbents are likely to fight more in courts and government corridors than in the marketplace.

They may wish to offer a pun to Mukesh Ambani: “Jio Aur Jeene Do” (live and let live).