Reliance Jio to ‘soft launch’ 4G services this month, broader availability in Jan

mukeshbhaiReliance Jio will announce the launch of its 4G services in India by the end of this month, but it will take a few more days after that for the operator’s SIM cards to be available in stores, according to company sources.

“We’ve been told that there will be a press conference on 28th, announcing the services,” said an employee.

“However,” he added, “the distributors (for SIM cards) have not yet been appointed.” As a result, said the employee, the public is likely to get connections only in January.

“It is supposed to be only a ‘soft launch’ this month,” he added.

The company will already have “a few lakhs” of SIM cards at launch time, indicating that at least some of its outlets will have ready connections. (According to sources, subscribers of Anil Ambani’s Reliance Communications will also be able to use Jio’s 4G network from January.)

Jio started testing its network late last month by seeding thousands of LTE handsets among its employees.

According to another employee, the company has already pushed over 1 lakh ‘LYF’ branded LTE phones into its distribution network, which is largely composed of Reliance Digital and Digital Express stores across the country.

“The distribution set up for LYF handsets has been finalized.. so we can expect the handsets to be available by the time the soft launch happens,” the person added.

HIGH DEMAND

Reliance Jio is already seeing high demand from customers, partly because its network is now available in most urban parts of the country.

As a result, the company’s distribution system will be under heavy pressure to sell its SIM cards, even if it does only a ‘soft launch’ in December.

Meanwhile, over the last few days, job postings for working with agents and distributors of Reliance Jio are turning up, including this one, indicating that the distribution network is being set up as we speak.

BAD NEWS FOR INCUMBENTSLAUNCH

All this is bad news for incumbent operators such as Bharti Airtel and Idea Cellular, who had heaved a sigh of relief when media reported that the company will launch its services only in the next financial year, indicating a launch in the March-April period.

However, according to sources, Jio is keen on sticking to its earlier guidance of launching in December, even if it’s a ‘soft’ one.

It is expected that Jio’s data pricing will be cheaper by 50% or more compared to its big rivals Bharti Airtel, Idea Cellular and Vodafone India. All these three operators get an average billed rate of around Rs 240 per 1 GB of data consumed on their network.

In comparison, Jio is likely to offer rates as low as Rs 50 per GB, while its average billing is likely to range between Rs 100-125 per GB.

UNTAPPED MARKET

There are also those who believe that Jio’s launch will not hit the revenues of existing operators as much as constrain their growth.

A large-scale migration of voice users from operators like Bharti Airtel and Idea Cellular to the new entrant is unlikely for two key reasons – the extremely low number of handsets that support Jio’s networks, and the ubiquitous coverage offered by incumbent operators.

While Jio can still address the network coverage factor by ensuring a gap-proof rollout, the handset factor is more difficult to overcome.

Other than recent models of Apple’s iPhone, practically no other phone in India supports LTE voice. Jio does not have any other voice service on its own network, and will have to depend on players like Reliance Communications, whose GSM coverage is not spectacular, to provide voice coverage for older (or existing) phones.

However, voice is only part — an increasingly insignificant part — of the story.

The bigger story — and the one that Jio is clearly aiming at — is the vast untapped market for data in India. When data services truly meet their ocean of potential, the voice market — which incumbents may continue to dominate — will look like a pool beside it.

And there are three key factors that favor Jio over the incumbents as far as tapping this humongous demand is concerned — first-mover advantage, higher spectrum capacity and the fickle loyalties of data consumers which offers low entry barrier.

LOWER BARRIERS TO ENTRY

It is estimated that over 90% of data consumption occurs inside buildings, and this is a key factor that favors Jio.

In addition, typical data users don’t have to bother as much about network coverage as network quality unlike voice customers, who have to look at both coverage and quality.

For example, even if an operator like RJio covers 95% of a district, voice customers will still worry about the missing 5% because they don’t want to be ‘out of coverage area’ when an important call comes through.

In contrast, data consumers look primarily at how good the signal and bandwidth is at the locations where they primarily spend their time — their homes and workplaces, and this is where Jio’s copious amounts of spectrum will come in handy.

HIGHER SPECTRUM CAPACITY

While the three big operators have only around 20 MHz of spectrum between them for 3G services, Jio alone will have around 30 MHz, and since this is 4G — it will offer the bandwidth of around 70 MHz of 3G spectrum. So, in case of small towns — if Jio’s signal is present — the company is likely to have 3-5 times the wireless capacity of its 3G competitors on its network.

Add to it the fact that Jio’s network is based on modern, high-efficiency components which are cheaper to run compared to older equipment, the new operator can offer data prices that are one-third that of 3G rivals and still make a profit.

In addition, Jio is likely to buy another 30 (15+15) MHz of new spectrum in the auction scheduled for February next year in the rural-focused 700 MHz band. Jio could also buy 10-20 MHz of new spectrum in the 2100 MHz band and use it for 4G, or top up its existing 2300 MHz purchase.

In fact, topping up the 2300 MHz holding is a very likely scenario as the base price for that spectrum is far far lower than the base price for the other bands. The main impediment to topping up its existing 2300 MHz spectrum is band-specific spectrum caps, but the TRAI has already suggested modifying that rule in its pre-auction consultation paper last week.

And finally, Jio has the first mover advantage as far as wireless data is concerned. Companies like Airtel and Idea are also rolling out their 4G networks — which are two to three times more spectrally efficient compared to 3G — but they would take another 18 months to match RJio’s 4G geographic coverage — and that too if the Mukesh Ambani firm stands still.

Though Idea, Airtel and Vodafone will also have 4G services in some cities by the end of this month, Reliance Jio has already covered thousands, possibly tens of thousands, of cities and towns.

In comparison, Airtel is likely to be present in around 300 towns and cities, Vodafone in a handful (starting with Kochi) and Idea in around 150 cities by the time of Jio’s launch.

Idea, which is the most aggressive in terms of the pace of its roll-out, has opened pre-registration for over 150 cities ahead of its own launch of LTE services.

In the eight circles mentioned on this page, Idea is estimated to have around 30,000 3G base-stations already, indicating that these are connected by high-speed fiber optic cable. As a result, converting these cells into 3G+4G circles would take only around 6 months.

But even after doing so, Idea 4G would cover only the four southern states, Punjab & Haryana and Orissa and Madhya Pradesh. However, to achieve a level of coverage that Jio already has in the 12 circles where Idea has 4G spectrum would require another 14-16 months, and even then the company will have only the fraction of spectrum capacity that Jio has.

Airtel and Vodafone too are limited in what they do in this space because of lack of spectrum, though they can remedy the situation in February’s auction.
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