So after knowing what is actually going in Mukesh Ambani’s mind, now lets see how he plans to use Jio for making crazy money out of it. Before that, lets try to figure out how do the telecom companies earn money and then we will figure out how Jio is different from others. Everytechtheory presents you the Jio revenue model in the “part 3” of the Jio series.
- If you have no or little idea about Jio, visit here: Reliance Jio – What it exactly is? (Part-1)
- Want to know how Jio came into being, visit here: Why a new Telecommunication company by Reliance? (Jio Series- Part 2)
The Mainstream way:
Every telecom company provides different voice and data plans to the users, which they call as Tariff Plans. Interesting point to consider is that not every user uses the same amount of data or spend on voice calling, this fact led the companies to introduce the concept of ARPU. ARPU is just the acronym for Average Rate Per User and it can be easily understood as “The average amount of money that the users of a company are paying them on an average by using their services.” The trivial term to consider here is “average” because some hardcore users spend thousands on tariffs while some may cut the bill short at a meagre cost of 50 INR. The ARPU usually is 150 INR for Indian Telecom companies and if someone spends more than 150 INR on the tariffs, he/she is considered as a “high valued customer”.
The Ambani way:
The entire game of Jio revolves around the ARPU.
Have a look at the Jio tariff plans:
It is very clear that the lowest plan which holds some value is of 149 INR which is approximately equal to the ARPU of other companies. So, the average of other companies is the starting point of Jio, Woah! The very next plan which is far more expensive is of 499 INR. This eliminates the entire competition out of the game.
For getting a better idea, recall the last time you visited Domino’s and ordered a soft drink to which the employee asks “Would you like to have a medium one or a large one ?”. At this point your answer would hardly matter because they played with your mind. Actually, they made you spend an extra buck without even telling you that there is a “small one” also available in the menu.
Mukesh Ambani did the same by the providing two offers at 149 INR and 499 INR. Now obviously because the costlier package will hold a better value more people will opt for it at 499 INR without any hesitation.
Kudos to Ambani, well done Billionaire!!
But a genuine question that may arise in someone’s mind is that “Dude! This is what they will make by providing their services and it is clearly not their profit. Don’t you know that providing better services require more money and hence the profit will not be as great as it is being anticipated!”
This is a perfect question and requires a thought. So, keep scrolling.
How do they provide unlimited voice calls?
Jio is an all-internet-based network and the voice calls are done through the 4G network and that’s why it is called VoLTE. To know more about VoLTE, Click here. Jio only have to pay 14 paise as an interconnection fees to the operators to which a call will connect. Further, TRAI is making efforts to reduce this fees or to completely remove it. So, Jio basically is paying peanuts for voice calls. If they charge for it, it will entirely be their profit.
How can they provide unlimited night 4G data?
This is a very interesting aspect. Jio spent 15000 crores for building an awesome fiber optic network all across the nation. It has the tendency to even handle 5G or maybe even 6G in the coming decade. It does not require a penny to provide internet to the users. The only money spent, goes in for the maintenance of the widespread infrastructure. Other Telecom companies have a FUP limit because their infrastructure is not capable to handle a lot of bandwidth.
Jio currently has the ability to provide truly unlimited data plans, but the company won’t do it because that will nullify their profits. Also, there is a catch in the “unlimited” night data. It is only valid for the hours between 2 AM to 5 AM.
This is how Mukesh Ambani is going to capitalize Jio through the ultimate revenue model.
It was my attempt to explain it you in simple language, as everytechtheory is all about it.
This is just half of the profit plan of the revenue model. We will talk about “the real game” in the upcoming articles of the Jio series.