Reliance Jio readies plan to disrupt with 5G

Raghu Gopal/CCS Insight
15 Feb 2019
00:00
News
Commentary

Reliance Jio, an Indian mobile provider owned by Reliance Industries, is the sixth largest wireless operator in the world with about 280 million subscriptions. That's an amazing feat considering it only started offering wireless services in late 2016. If the record books have an entry for the speed of gaining wireless subscribers, Jio would be at the top.

Jio offers incredible deals on its LTE service, and subsidizes some handsets to get more 4G phones into the hands of more people. With 250 million smartphone users, Jio has helped many previously disconnected customers to begin living a digital life. It sells the latest flagship devices from Apple and Samsung, as well as entry-level smartphones for as low as $55, moving massive volumes of such phones. Already about 40 percent of India's smartphone users subscribe to Jio services.

Jio has been a changing force in the Indian telecommunication market over the past two years, causing rivals to suffer significant financial losses and forcing the industry to realign itself. This pressure at least partly motivated Vodafone India and Idea Cellular to merge during the summer of 2018 to be more competitive against Jio.

But the operator isn't settling with its past success. It's looking to bring more disruption to the Indian market by launching 5G services in 2020. Later in 2019, the Indian government plans to auction off spectrum intended for next-generation networks. This includes spectrum in the 700-MHz, 3.5-GHz, 24-GHz and 28-GHz bands. Like in other countries, Indian authorities are eager to get 5G services up and running, in the hope that the technology with deliver an economic boom.

Jio says it plans to test a 5G service shortly after it buys spectrum and wants to introduce the offering to consumers by April 2020. Initial coverage is likely to be patchy, but that's still an ambitious timeline and the operator has a track record of keeping its word. But for rapid adoption in its coverage areas, Jio will need low-cost 5G handsets and other connectivity equipment, and it could take several years before these begin reaching entry-level prices.

When Jio began its LTE service in the second half of 2016, the market for 4G smartphones and feature phones was very mature. Many low-cost 4G handsets were already available at the time of launch. Device makers certainly see a great deal of opportunity in 5G devices, but it's unlikely that they'll deliver any bargains for several years. Until 2020, 5G phones will be mainly top-level flagship devices — most going well above the $1,000 price tag — as well as expensive fixed-wireless and mobile broadband equipment.

Jio hopes to accelerate the pace of 5G adoption in India by working with ecosystem players to bring down costs, allowing them to scale up quicker than otherwise possible. This is an exciting prospect, not just for the Indian market, but for operators in other parts of the world. Furthermore, the operator's investment in fiber, announced in summer 2018 for its JioGigaFiber broadband service, will provide crucial backhaul for 5G. If successful, Jio could quickly become one of the world's largest 5G operators.

But this will be a challenge. It will have to partner with local and international device makers and chipset suppliers such as MediaTek to guarantee volumes large enough to be worth their while. Jio certainly has the audience size, but it will need to make 5G much more affordable. We don't expect to see entry-level prices for 5G devices for four or five years.

To date, the industry has been looking at China, South Korea and the US for leadership in 5G. Now the sub-continent is a new market to follow. It would be a brave person to bet against Jio succeeding again.

Raghu Gopal has more than 20 years' research and operational experience

This article originally appeared on CCS Insight

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