By Shashank Bengali and Parth M.N.
Los Angeles Times
WWR Article Summary (tl;dr) Mukesh Ambani’s “Reliance Jio service” is a symbol of the surging tech market in India, which has more than 1 billion cellphone users but the lowest rate of internet penetration of any major economy.
Engineers and entrepreneurs with roots in India have helped build titans of Silicon Valley. Now an Indian technology company says its growth is outpacing such giants as Skype, Whatsapp and Facebook.
The country’s richest man has launched a mobile telecommunications network that signed up more than 50 million subscribers in its first three months, which he said makes it “the fastest growing technology company not only in India, but in the history of the world.”
Mukesh Ambani’s Reliance Jio service is a symbol of the surging tech market in India, which has more than 1 billion cellphone users but the lowest rate of internet penetration of any major economy.
It is also a sign of the power of a good deal: Jio is offering mobile data and internet-based calling within India free of charge for six months. That has forced competitors to reduce their rates and is expected to make mobile data more affordable for Indian consumers, who pay some of the highest prices in the world, in terms of purchasing power, to surf on their smartphones.
That could go a long way toward expanding internet access in India, where only about one-third of the 1.3 billion people go online regularly.
Poor fixed-line infrastructure means that most use the internet on their phones _ but patchy cellular data networks and electricity shortages in rural areas are barriers to the “digital India” that Prime Minister Narendra Modi has boasted of creating.
With two out of five Indians younger than 20, tech companies see this country as one of the world’s last great sources of new customers. Before Jio’s rollout in September, Facebook, Google, Uber and other U.S. giants had all introduced initiatives targeting Indian consumers, with varying degrees of success.
Ambani is expecting his gamble to pay off: He said he has invested more than $22 billion, which amounts to half his conglomerate’s annual revenues, in building Jio.
“The numbers in India are staggering by any standard,” said Arpita Pal Agrawal, a telecommunications industry analyst with Pricewaterhouse Coopers. “Other than China, we are the most ripe nation, from the standpoint of numbers and the age of our population, to go digital.”
The company’s launch comes as India grapples with a surprise demonetization initiative in which 86 percent of the country’s paper currency was banned. The government says the move will curb unregulated cash transactions and boost the use of digital payment methods, which fits right into Jio’s strategy.
Jio advertises high-speed mobile data and voice-over-internet calls that bypass India’s notoriously unreliable cellular phone networks. Like Google and Apple, it also provides a suite of apps offering on-demand entertainment, digital payments, cloud storage and more.
It is financed by the deep pockets of Ambani’s Reliance Industries, a massive conglomerate that sells everything from groceries to solar energy. The 59-year-old chairman, best known for building a 27-story, $1 billion family residence in Mumbai, has cast Jio’s launch as an exercise in patriotism.
“Thank you for reinforcing our belief in India’s digital appetite,” Ambani told an audience this month. “Thank you for launching our nation on the path to the top 10 digital countries in the world.”
The company included a picture of Modi, dressed in a blue waistcoat matching Jio’s colors, in its marketing blitz in September, an unprecedented stunt that raised questions about whether the country’s top official was endorsing a private business.
An official in India’s information ministry said this month that Jio did not have permission to use Modi’s likeness, a breach for which the company could face a fine of no more than 500 rupees, or about $7.
Ambani’s zeal has irked rival operators, which accuse the government of allowing Jio to purchase space on the country’s cellular spectrum at reduced rates. Regulators have found that competitors are blocking calls to their networks from Jio phones and have recommended more than $450 million in fines.
Some reject Ambani’s comparisons to Facebook and the Whatsapp messaging service, each of which boast more than 1 billion users worldwide.
“If you set up a stall and give free food to everyone, you will grow fast,” said Nikhil Pahwa, editor of Medianama.com, an online news site covering the Indian tech industry. “Giving connectivity and calls for free will allow them to get a user base but that doesn’t necessarily mean the user base will stay.
“Facebook and Whatsapp grew organically, whereas Jio spent truckloads of money on advertising and had massive media outreach coming from a multibillion-dollar conglomerate. So I don’t think they’re comparable.”
While it may be unfair to compare social networks like Facebook with a capital-intensive mobile internet service, industry observers believe Jio actually expected to have signed up more users by now, as many as 100 million. The company has extended its original three-month no-cost offer for an additional three months.
The service was crushingly slow at the outset, although users say speeds have improved in recent weeks, particularly in cities. Jio has laid more than 150,000 miles of fiber-optic cable, significantly expanding India’s cellular infrastructure.
“Demonetization has pushed people to look at e-wallets, e-payments, where they until now were procrastinating,” Agrawal said.
But for all the hype surrounding Jio, many price-conscious consumers said they were taking advantage of the free data to download videos and stream movies, while retaining their primary cellphones to make calls. Jio still lags behind the largest mobile phone companies in India: Bharti Airtel had 257 million subscribers, according to statistics released in August, and Vodafone India had 200 million.
Shirirang Swarge, a 25-year-old photographer in Mumbai, said he didn’t trust Jio’s data speeds outside major cities and would stick with his regular cellphone provider, the British-based multinational Vodafone, whose prices have come down.
“I don’t plan to continue with Jio once the free offer ends,” Swarge said.