Corporate legend has it that Mukesh Ambani, chairman and managing director of Reliance Industries and a chemical engineer by training, learnt all about telecommunications while clocking miles on the treadmill. That was back in 2002, but the zeal to learn hasn’t diminished. His colleagues say he has wide-ranging interests, from robotics to sociology, adding that Ambani has completed a number of online courses on platforms such as Coursera—while on the treadmill. Clearly, exercising body and mind is not just a slogan.
I meet Ambani in his office at Nariman Point, one of the things I’m really curious about is what he does these days when he’s running. Listening to the speeches and teachings of Swami Vivekananda, is the reply I was really not expecting. “A lot of high-quality stuff is available online on Indian spirituality,” he tells me. “It’s good. Very good.” Given that he’s pushing 60 and has begun initiating his children into the business, is this his preparation for the third ashrama prescribed for Hindu men? (The four ashramas or stages of life start with the student or brahmacharya, going on to the householder or grihastha, and then to the more contemplative and spiritual stages of vanaprastha and sannyasa.)
I would have asked this, except that someone contemplating an ascetic life isn’t going to be making warlike moves. And that’s just what Ambani did in September when he launched his much-awaited telecom venture, Jio. Voice calls, which contribute to some 70% of the revenue of Indian telecom players, were offered free to Jio subscribers.
The big bet was on data; Ambani is convinced that data and data networks are “essential infrastructure” that the country needs to drive the next economic revolution.
“When you and I were 18 years old, we had to be taught many things,” he says wryly. “Now an 18-year-old just figures out these things on his mobile phone and within a few minutes he can be more educated than all of us on a particular topic. This is happening to millions and millions of people at the same time. That is the power of the new interconnected world.” There’s an almost messianic zeal in this approach to telecom. Yes, Ambani and his team do talk of pricing strategy and reach and ARPUs (average revenue per user), but underlying that is a desire to change the way people think and work.
“Our mindset is of a facilitator. It’s like saying, you know, if you have good roads in the country, the journey becomes smoother. The same way, if you have this digital infrastructure, everybody can prosper and everybody can aim higher and do better. That’s the objective,” says Ambani. And no, he adds before I can ask, it’s not megalomania (his choice of word), or some crazy plan to own the Internet.
It’s more about creating a certain value and opportunity for every user. I ask Ambani to explain that, and he launches into an explanation that he’s clearly passionate about. A Bollywood star, he says, can use the Jio cinema app to “show me all his work in one place”. Or a patient can get critical advice from his doctor, even if the doctor is holidaying in the hills. Students and teachers can resolve queries in the course of a video call. “Like my daughter in Stanford. She always does that. For her, accounting is a new subject and she has [many] queries,” says Ambani, adding that an online interaction with a teacher generally sorts things out. “This is what we call digital life,” he winds up.
I’m almost drawn into his vision of a digital India where everything and everyone is connected. Then I remember what a Reliance insider had told me about Jio, that its network will remain a work in progress for the foreseeable future till it sorts out its countrywide optical fibre network. Till then, the company is going to find it tough to make money, says a telecom analyst. Prashant Singhal, global telecommunications leader at EY, adds: “It is important to note that the paying data users, who on average consume 0.7 GB of data a month, are still staying with the incumbents and have not ported to Jio. The high consumption of data on Jio seems to be only because it is offered free.”
Ambani is going to first have to resolve issues of revenue and the like, as well as other issues such as customer service (which dog all telecom service providers) if he wants to make true that vision of Jio in the near future.
As of now, Jio’s speed lags behind Airtel, on whose network the most amount of data is consumed. The company has had to tweak connectivity ports, increase antennas, and go to small-cell coverage into many areas. Which is what the Jio insider was talking of when he called this work in progress.
That’s not something worrying Ambani, from what I see. Dressed in his customary uniform of loose black trousers, untucked white shirt, and hair uncharacteristically un-gelled, he is the picture of ease. This is one of the very few interviews on his businesses that he’s given to a magazine; the last one I remember was in 2002, during the launch of his first telecom venture, Infocomm. But while Ambani is willing to talk freely about all things Jio, he refuses to be led into a comparison of Infocomm and Jio. I lead the conversation to Infocomm ever so often, but he refuses to take the bait.
The only time he agrees to talk of Infocomm is when I bluntly ask what he learnt from Infocomm that he brings to Jio. “What I have learnt is that it is much better to go with the judgement of our younger team leaders than to impose our own thoughts onto them. When I was 45 years old, I might have said ‘this is it’. Now I firmly believe that you are better off when you listen to the next generation.” Not a word about pricing, or regulatory changes, or any of the things I really want him to talk of.
The reason I’m so keen is that to understand Ambani’s big gamble on data, it’s essential to know some of the history that shaped Jio—including Infocomm.
Launched in 2002, it was then Ambani’s most audacious move; into an industry dominated by expensive GSM calls, he unleashed cheap CDMA technology. He also launched the concept of a handset bundled with a calling plan.
On the back of cheaper technology and a clear price advantage, Infocomm was soon the third-largest telecom player in the country. (He’s using a similar strategy now with Jio, 14 years after Infocomm debuted the Dhirubhai Ambani Pioneer offer with the stated objective of making phone calls cheaper than postcards.)
To be sure, the Infocomm idea wasn’t a plan devoid of glitches. But before the cracks began to show, Infocomm was hived off to Anil Ambani as part of a settlement between the brothers, and Mukesh Ambani agreed to stay away from telecom for a period of five years.
But all those hours studying telecom when running had given Ambani a taste for the business, and he kept a close watch on the industry. With his deputy, Manoj Modi, he studied the market and soon realised that for a telecom player to succeed, data was critical. In 2010, as soon as the non-compete clause in the agreement with his brother expired, Ambani bought broadband wireless spectrum; he had already set up his telecom company, Jio.
Was that the extent of Ambani’s dream, to be an Internet service provider (ISP)?
The broadband wireless licence did not allow Ambani to provide voice calls. Broadband wireless itself had not made the move to handsets, and the consensus in industry circles was that Ambani didn’t really have a strategy in place. A senior Reliance executive tells me those were dark days indeed: “The network engineers would literally cry as the broadband spectrum would not penetrate even a glass wall.”
The murmurs began getting louder that Ambani had made a monumental mistake in buying broadband wireless spectrum. His next few steps did not give critics any reason to belt up; he dabbled with Intel’s WiMAX technology, but when that proved a lead balloon, he looked at other technologies. Those proved inefficient, especially to devices on the move.
Meanwhile, competition was buying expensive 3G spectrum to cater to mobile Internet needs. However, many of them did nothing after buying the spectrum, since upgrading infrastructure was seen as prohibitively expensive. Ambani was still sitting on the broadband wireless spectrum.
Competitors’ 3G services began in a small way in the metros at steep rates; 1 GB of data cost Rs 600 (including taxes) for postpaid customers and Rs 4,000 for prepaid. Ambani knew 3G wasn’t the route for him, and was scouting around for the right technology. By 2013, news began to come in about early tests for VoLTE (voice over long term evolution) being done elsewhere in the world.
When Ambani learnt that this technology would allow voice to be carried as data packets or files, instead of the ‘circuit switching’ that happens in conventional mobile telephony, he knew this was what he had been waiting for, and Jio as we know it came into being.
Reliance’s till then somewhat somnolent telecom business was shaken up violently by VoLTE. Ambani was on a tear, knowing that if he wanted to beat the incumbents, he had to create a futuristic, high-speed data network that had the capacity to carry all the voice and data, without having to replicate network for the older 2G/3G technology. He was also determined to build a future-ready, if not future-proof, network. Now that he knew exactly what he needed to do, Ambani and his team went about it with typical efficiency.
In a lightning-fast move that left competition gasping, Ambani ensured that Jio applied for and got a unified licence in October 2013, which meant it could do anything it chose with its network—including offer voice. Over the next six months, global players including giants like AT&T and T-Mobile had launched VoLTE services. (Ambani tells me that when it is fully ready, the Jio network can be easily upgraded to future technologies, including 6G.)
Ambani spent the next several months sewing up the front end; in other words, beefing up spectrum. In early 2014, Jio bought short-range bands (used by other VoLTE players) and augmented this by tying up with Anil Ambani’s Reliance Communication. That gave Jio an additional pan-India 850 Mhz spectrum, which has a great reputation for indoor connectivity.
Ambani then turned his sights on the mobile towers business. His team came up with the idea of using the new unipole design, which was cheaper to make and occupied a smaller space than legacy towers, and Ambani began the process of interconnecting these towers using optical fibre. The idea is to ensure that networks never face a data demand overload. It’s working, say senior executives at Jio. “States like Jharkhand and Orissa, which had a data network drought, are now consuming vast amounts of data, and 90% of the network has held up,” adds Ambani.
To get all this up and running, Ambani has pumped in upwards of Rs 1.5 lakh crore. It sounds way too much to me, but I’m soon disabused of that. “Jio has paid market cost for spectrum unlike the incumbents some years ago. So, in the long term, our investment will look more efficient and, therefore, more productive,” says Ambani; that’s a view echoed by most of the people I speak to in the Jio team.
I’m not entirely convinced, especially when I’m told that Ambani plans to pump in another Rs 1 lakh crore over the next two years to take Jio across the country. It seems like a great deal of money to throw into something effectively untested. Ambani has no such doubts, of course. “I am convinced that with Jio, we are converting India from a data short to a data long market.”
That conviction is supported by consumption data. Per capita consumption of mobile data in the developed world is in the 6 GB range, compared with 0.9 GB in India. Home data consumption (broadband) in countries such as the U.S. and Japan is an average 150 GB compared with less than a tenth of that in India.
Add these pitiful numbers to the fact that the demand for mobile and home data is increasing, and the sum is the opportunity Ambani is seeing.
There’s also the fact that Indian telecom revenues, at less than 1% of GDP, contribute far less to the economy than their counterparts do in other parts of the world. “I still think India will follow the global paradigm. In the long term, we will be on a par with the rest of the world. So telecom should be about 1.5% to 2% of GDP and will grow in double digits annually,” Ambani says.
A 2016 (third quarter) report from Akamai Technologies says the average broadband speed in India is 4.1 Mbps. That’s lower than the global average of 6.3 Mbps, and a fraction of the average U.S. speed of 16.3 Mbps or South Korea’s 26.3 Mbps. The year-on-year connection speeds in India rose by 62%, thanks partly to Jio’s entry and the competition it fuelled.
A quick word on competition is essential, given that the industry is still feeling the post-Jio tremors. The launch of Jio also saw Idea Cellular’s market value dip by 50%, as analysts found it unprepared for the new 4G VoLTE technology.
Vodafone, meanwhile, has been quietly raising the cap on data depending on the customer. I speak to A. Roy, marketing executive with a media company, who says the amount of “free” data in her plan has been going up steadily. She used to get 8 GB of data free, after which Vodafone would charge her Rs 500 for each extra GB. Since Jio was launched, she gets 35 GB of free data.
Then, there’s Airtel, which has launched V-Fiber, its upgraded fixed optical fibre service to homes which can deliver 100 Mbps. Taking a leaf from Ambani’s book, subscribers will get free voice calls.
Both Airtel and Vodafone have announced plans to upgrade their data network infrastructure, spending Rs 75,000 crore between them in the next three years. Vodafone has further committed over $5 billion (Rs 31,585 crore)to buy 4G spectrum whenever it becomes available. The two firms together account for over 60% of the $37 billion Indian telecom revenues and also have the biggest share of high-spending, postpaid customers, most of whom have stayed with their networks since inception.
Remember what EY’s Singhal said: that the high data consumption among Jio users could very well be because the plans were being offered free. Subscribers may try Jio out but stick with their existing plans.
There are also recent analyst reports by firms such as JP Morgan and Morgan Stanley, who say that they expect only 50% to 60% of the 100 million customers that Jio expects to garner by 2017, to eventually convert to paying customers.
Ambani is not content having set the VoLTE cat among the 3G pigeons. He’s looking at data usage and at applications that will push demand for data. Video is a big consumer; a Jio insider tells me YouTube is perhaps the biggest beneficiary of the Jio launch, with videos shared across platforms. Akamai predicts that in the next decade, with connected TVs and smart set-top boxes already leading to better image fidelity and longer viewing times, the data consumption in video will all be for HD quality. This alone will multiply data usage exponentially.
In the short run, Jio will take advantage of the unpreparedness of the existing telecom players and overall lack of broadband connectivity. Says the Jio executive, who declines to be named: “Generic video is low revenue but [has] very sticky demand. Since we are extremely ARPU focussed, we will give the customer the usage he demands, even if it is at a further lower price”.
But Ambani says the real kicker to data usage will be from apps that will use artificial intelligence to get things done. Back in the Infocomm days, Ambani had set up a software division to create applications (music videos, games, and the like) for subscribers to use over the CDMA network.
In his Jio phase, he is integrating AI applications that he will sell to specialised customers. “To deliver competitive services you need to have artificial intelligence [AI] at the back. If I know what movies you are watching and if I can recommend better things to you, then to that extent I am doing you a service,” he says.
It’s not just entertainment, though. His team is developing a program that can read X-rays and even suggest preliminary findings to a radiologist. Now, medical reports and their transmission consume a lot of data. Transmitting an MRI scan can take anything from 6GB to 10GB of data.
As more medical responses are conducted over the Internet, Ambani says health will turn out to be a big focus area for Jio. “We will continuously prime our network for higher speeds and lower latency, which will be useful in mission-critical applications like driverless cars and medical surgeries,” he says.
There is evidence that some of this is already happening in the country. Medical equipment firms such as GE and Philips are setting up remote monitoring centres for hospitals which are facing a resource crunch in hiring super specialists.
GE has set up one such facility in Bengaluru for HealthCare Global (HCG), a hospital chain that specialises in cancer care. Though HCG is setting up cancer diagnosis centres and hospitals across the country, its best specialists are housed in Bengaluru. Finding it increasingly difficult to locate organ-specific oncology specialists in HCG’s remote centres, the chain’s founder and chairman Ajai Kumar set up the Bengaluru centre, so the medical reports of patients in remote centres can be reviewed by the specialists.
Every Wednesday, Kumar holds an open house with his doctors to even discuss some of these cases and lines of treatment. “We are now looking at options at keeping critical-care patients who don’t need much intervention at their own homes and monitoring them online,” he says.
Ambani says that he can point to several application, including education that he thinks will be other big consumers of data. As far as education is concerned, he points out that Indians are already signing up in droves for courses from online institutes like Coursera or EdX.
Though much of Jio is expected to be the “essential infrastructure” to facilitate digitisation, he also says that it will be an intelligent network to suggest options based on usage of data. Says Ambani: “I see it this way. If the industrial revolution mechanised movement, the current revolution will mechanise the mind. We are essentially bringing the power of computing to our everyday lives.”
It all sounds very good, but I still see many hurdles on the road to full connectivity. The advantage here is that Reliance has deep pockets, and Ambani is willing to pump in large amounts of cash to keep his dream alive. And that could well be what Jio needs.