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The shortest night in the world...

...Or why Reliance Jio will wipe out competitors and still make lots of money

The shortest night in the world...

Here are some of the most common beliefs that people seem to have about the Reliance Jio services.
1. Jio is competing on price
2. Jio is charging very little for its services so it's probably in 'startup' mode--make losses to acquire customers
3. There's a price war coming and mobile data bills will get smaller and smaller
4. Reliance is giving great deals for its customers and this proves that it has suddenly transformed into a company that believes in being sweet to its customers.
It so happens that they are all dead wrong. The reality is the exact opposite. And that's a public relations masterstroke from the Big Ambani.
But first, let's explain the title of this analysis. Most people are amazed, stunned and overwhelmed that Jio's services are absolutely free during the night. However, the fine print on its website says that this 'night' will last for only three hours, that is, 2 am to 5 am! Check out here, but you'll have to look very carefully--this definition of the Jio night is in a tiny font, in light grey colour on a white background. In fact, this little con of the three-hour night tells us all we need to about point no. 4 above.
The three-hour night apart, here's the basic truth about this company:
Jio's plans and pricing are designed towards one end only:
1. To attract existing high-end customers away from the older services
2. To make sure that low-value customers do not come to JIO.

Here's what no one is telling you: Jio is the most expensive mobile service in India, in terms of the total size of the bill. The MINIMUM monthly expense needed to be a Jio customer is ₹149 per month on post-paid and ₹149 per 28 days on prepaid.

Think this is low? So do people who are prosperous enough to read and write in business newspapers. However, remember that the Average Revenue per User (ARPU) of existing Indian mobile services is in the ₹130-200 range. That's the average. And since there are many customers who are above (a lot above) this level, it should be obvious that there is a huge mass of customers who are way below ₹150 or so in what they spend every month. This is the missed call crowd. These are the people who normally have a few rupees balance in their phones and whenever they need to make a phone call, they go out and buy a five or ten rupee recharge coupon. This market has been created because of the race to the bottom that the incumbents have been running. What has enabled this race are 'unlimited validity' plans whereby once you take the phone, the number stays valid and incoming calls can be received as long as there is a tiny minimum balance in the account.
Reliance does not want these people. It has no use for these freeloaders' missed calls choking up it's shiny 4G network. Instead, Reliance wants to lure away everyone who can spend at least ₹149 a month and continue to do so on a permanent basis. Its revenue per lowest-end customer will be ₹149, which is the average for others.
So far, all new service providers made the blunder of enhancing customer numbers any way they can. However, high value customers are difficult to lure, so all new services have to start at the bottom and keep struggling for margins.

So how will Reliance break out of this trap?
This is the key part, the acid test which will make or break Jio: Delivery of the promised performance. The fact is that Indians who can afford a smartphone are hungry for a good data service. Existing service suck, and suck big time. If Jio can deliver even half of what it is promising on performance, if really can get even 5-10 Mbps to your phone reliably, at all times and at all locations, then it's game over for the incumbents. In a matter of months, at most a year or two, a vast majority of intensive data users will migrate to Jio. The incumbents' ARPUs will fall even further and the Big Ambani will have conquered a whole new empire.
So can Jio deliver on performance? So far, it looks like it can. They've spent years building (and months testing) the best network money can buy. In fact, that's the difference. Instead of the hodge podge 2G, 2.5G, 3G patchworks that the incumbents have been getting by with, Jio starts with a ₹1-1.5 lakh crore worth of a clean network of the latest tech.
We all know that the Reliance empire was built on cunning and cleverness, but it was also built on flawless execution enabled by the cunningness. The next one year will be the ultimate test of that skill.