When it comes to telecom, his dream project Jio, despite gaining both immense popularity and rivals in a short span, is running into losses.
Ambani, however, wants Jio to go the
Verizon Communications way, which became the largest wireless carrier in the United States, enjoying a 5 to 10% percentage points higher return on capital as compared to its competitors.
Also read:
Jio likely to continue with slashed prices to gain maximum subscribers Since its commercial launch in September last year, Jio has gained more than
109 million subscribers, thanks to its free trial till March 31
st, which has now turned into an
attractive tariff plan. Jio is already supplying more than 1 billion GBs per month, which almost matches the data all U.S. networks supply together.
Jio also forced market leaders
Bharti Airtel, Idea Cellular and Vodafone India slashing their prices, while Idea and Vodafone also announced their
merger.
Reliance aims to capture
half of market share by 2020.
However, as per a report from S&P Global's Indian affiliate, Crisil, the fall in 4G rates has led to a practically flat industry revenue growth, says
Bloomberg.
The reason why
Ambani wants Jio to replicate
Verizon's success is its history, which shows that market leadership is worth bleeding for.
Verizon has a customer churn rate of just 1.4%, while in the Indian market, this rate easily lies between 4 to 6%, and took in 45% of its revenue as earnings before interest, tax, depreciation and amortization last quarter.
Since Verizon leads the US telecom market, it enjoys a higher return on capital, and it’s this success that Ambani wants to replicate with Jio’s aggressive price war.
However, from September to March, Jio's losses tripled from a year earlier and reached $3.5 million, which is even upsetting to the company keeping in mind the $30 billion that Ambani had spent on the 4G network.
However, Jio’s investors would be impressed by its ability to get to 200 million stable customers, each one of whom would at least spend $4 a month.
Everything said and done, Jio replicating Verizon’s success is a long way ahead, but at least a mark of 200 million subscribers would be a start.