| 6 minutes read

6 minutes read

Here’s Why Ambani’s Free Phone Idea Was One Of The Best Business Models

| Published on July 24, 2017

At first, they will ask you why you are doing it. Later they will ask you how you did this. That makes a huge difference! Business is an art and there’s no secret formula to it but to focus on what is the need of the consumer and how to grab the audience. You excel in that and you might be the next Mukesh Ambani!

If the business is a combination of war and sport then definitely Reliance Industries have won it. The last being by the launch of their Jio Smartphone. When he announced the first ‘India ka Smartphone’ people got excited knowing the phone will be available for an effective price of Rs ‘0’. But wait here comes the mind. There is a catch in the form of one-time security deposit fee of Rs 1,500, which is refundable only after 3 years, that the user needs to pay. Wait did you drop your mobile? Wait for more as we unveil to you that why this free phone idea makes it the best business model!

Let’s calculate and get into the head of Ambani to get a clear view:

1. Building A Market

Once Ambani announced free unlimited data and Jio came in market people went gaga. Unlimited 4G data and also free voice calls saw millions of people rushing and subscribing for the plan. But Reliance Industries had other plans for future. They actually wanted to create a market and number of followers before setting in real business and they were successful. He didn’t make money anytime soon from Jio but killed all the competitors by offering free for some months. People got used to high 4G speeds and won’t settle for anything slow for not so much price difference in future. The first business rule is to make a huge consumer base and then grow on it. Jio did that and did it well!

2. The Jio Business

That didn’t give him profit soon but yes was a slow and steady business well made!


Let me solve this Tariff Plan math for you! If you are a voice call lover person you must be happy with Rs. 149 plan for 28 days as you will get unlimited voice call. In India, the monthly average revenue per user (ARPU) the current network providers get is around Rs 150 per month. There you see what they achieved! If you pay around Rs. 250 you are a valuable customer. Jio did same or more profit than other by just giving SMS, Voice calls and night data for free but just pricing things differently!

What if you are a data person? Look close no plans exist for you in between Rs. 149 and Rs. 499! So you by force is asked to go for 499 plan. For example, if you choose 299 plan, and once you exceed the 2GB limit you will have to buy a separate pack. Too much maths right! Again see that if you want to really use more than 4GB of 4G, then you have to spend double and move to the 999 plan. Nothing in between!

Also if you see each plan is for 28 days validity. If we divide the no of days in a year by 28 we see actually we have 13 months to pay for ( Grab your calculator). Profit, I must say!

3. Maths For The Free Phone

All are interconnected in business. To get this phone you will have to use Jio sim which again comes with all these plans. But to your surprise, these phones are not effectively free. You have to submit Rs. 1500 for booking and if you become a subscriber you are bound to use this 4g Volte Smartphone until 3 years and then you are free to submit.

Well, Ambani declared while launching that almost 50 crore people are using smartphones presently and no doubt that would be the target audience If 50 crore people deposit for the phone Rs 1500 Jio will receive 75,000 crore Rupees. If Jio is successful in at least providing service to half of this target population they will make about 37,000 crore rupees. And remember once you get this you can’t leave it for 3 years. The data plan is of Rs. 153. If you use this data package for 3 years religiously in total you are paying almost Rs. 5508. If you deposit Rs. 1500 in the bank you will have to pay Rs. 337 extra as a tax for three years. This amount will go in Reliance’s deposit, not yours. In past few months, Reliance has made 10 million subscribers and on this basis will look forward to growing more.

4. The Apps

The real money comes from Jio Apps. JioPlay, JioOnDemand, JioMag and Jiobeats are the inbuilt apps found on the smartphone. Remember these apps were present during Jio Service too. They were made it free for first few months as they looked forward to making it a strong market by grabbing the number of users. The ability to watch Live TV channels on smartphones is also a cool idea and would be a huge hit in rural areas. Also, people can only use these apps once they are Jio users only as other connections won’t give them an access to these apps. They have launched broadband and wireless services, a streaming service similar to Netflix, music streaming app, payment solution/wallet and much more. Obviously, they are bound to make some profit. Jio already has data traffic of over 125 crore GB and streaming videos of 165 crore hours every month.

Other than this Reliance industry has done other business deals and mergers in past few months.

No matter how tough the math is for this business model but all definitely leads to the path of profit and has surely created a lot of buzz in telecom market!

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