Reliance Jio’s entry led to $10b annual savings for India

Reliance Jio Infocomm’s entry in September 2016 led to $10 billion in annual savings for India and an unprecedented surge in data consumption, the Institute for Competitiveness said in a report.

Jio has made data accessible and affordable, with average prices per GB of data dropping to Rs 10 from Rs 152, bringing the internet within the reach of a larger proportion of the Indian population.

“Within six months of Jio’s launch, India became the highest mobile data user in the world, consuming over 1 billion GB of data every month compared to 200 million GB earlier,” IFC said in its report released Thursday.

The yearly savings of the entire economy due to a rise in affordability of data prices come out to be Rs $10 billion, IFC said. Taking a conservative estimate that every consumer uses 1 GB of data a month, we can calculate the financial gains to the economy by estimating the benefit to all 350 million internet subscribers of the country, it said.

Jio changed the basis of competition by offering free lifetime calls in an industry that derived 75% of its revenue from voice services and made “data the new focal point” of competition, it said.

“India has surpassed the US in terms of app downloads, making it second only to China,” following Jio’s launch, it added.

IFC analyzed Jio’s entry to measure the impact of internet penetration on economic growth. The model used data from 18 states for the period 2004-14 and showed that a 10% increase in internet penetration led to per capita GDP rising by 3.9% if all else remains constant.

According to IFC, Jio will help expand India’s per capita GDP by about 5.65%, if everything else is kept constant in the economy. The effect of GDP growth due to higher internet penetration, it said, will not just be a contribution of the telecom sector but also various externalities arising out of the internet economy.

Post-Jio, consumers can experience a wide bouquet of digital applications that address needs such as education, health, entertainment, and banking, said IFC, the Gurgaon-based Indian unit of the Institute for Strategy and Competitiveness at Harvard Business School.

Although India’s telecom industry has generally faced stiff competition, matters got aggravated after Jio’s disruptive tariffs compelled operators to respond, putting pressure on their revenue and profit. These factors led to merger announcements by some companies and exits/buyouts by others.

The price wars have already compelled second and third-ranked Vodafone India and Idea Cellular to merge, while Bharti Airtel bought out Telenor India and Tata Teleservices’ consumer mobility business. Reliance Communications shut its wireless business while Aircel shrank its operations, leaving Bharti Airtel, Jio and the emerging Vodafone-Idea combine as the dominant private telcos.

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