Case Study: Rise of Jio and RCom Marketing Strategies

This case study examines the competitive dynamics within the Indian telecommunications sector, focusing on the rise of Reliance Jio and its impact on Reliance Communications (RCom). The study begins with a brief history of RCom, highlighting its evolution and market position. It then delves into the background of the study, outlining the challenges RCom faces due to Jio's aggressive market entry with free services and the resulting customer attrition and financial losses. The case study analyzes the market situation, including SWOT, PEST, and Porter's Five Forces analyses, to understand the external and internal factors influencing RCom's performance. It also explores RCom's recent challenges, including declining market share, debt, and customer base. The core of the study focuses on RCom's marketing strategies, including the Ansoff Matrix and marketing mix, to counter Jio's dominance. The methodology section details the research approach, data collection methods, and sources used. The study concludes with a timeline and bibliography, providing a comprehensive overview of the competitive landscape and marketing strategies employed by RCom in response to the disruptive entry of Reliance Jio.

Running head: CASE STUDY
The Rise of Reliance Jio and Marketing Strategies of Reliance Communications: A Case Study
Student’s name:
Name of the university:
Author’s note:

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Table of Contents
1. Introduction..................................................................................................................................2
2. Brief history of Reliance Communications (RCom)...................................................................2
3. Background of the study..............................................................................................................4
4. Tentative structure.......................................................................................................................7
5. Rationale of the study..................................................................................................................8
6. Situational analysis of Reliance Communications....................................................................11
6.1 SWOT analysis....................................................................................................................11
6.2 External Environment (PEST) analysis...............................................................................12
6.3 Porter’s Five Forces.............................................................................................................13
6.4 Industry position of Reliance Communications..................................................................14
7. Recent Challenges of Reliance Communications..................................................................15
8. Marketing strategies of Reliance Communication................................................................16
8.1 Ansoff Matrix......................................................................................................................17
8.2 Marketing Mix.....................................................................................................................18
9. Methodology..............................................................................................................................19
9.1 Types of Investigations:.......................................................................................................19
9.2 Data collection methods:.....................................................................................................20
9.3 Data analysis:.......................................................................................................................20

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9.4 Data sources:........................................................................................................................20
10. Timeline of the study...............................................................................................................21
Bibliography..................................................................................................................................23

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1. Introduction
Reliance Communications has been facing challenges for higher competition in the
telecommunication sector as Reliance Jio entered the market with ‘free packages'. In the second
half of 2016, Reliance Jio created a storm by offering free 4G data services and unlimited free
calls to the users. In the last few years, Reliance Communications has been facing the issues of
reaching new customers and the existent customers left the services. However, Reliance
Communications (RCom) has the ability to provide same 4G service to the customers as they
have pan India spectrum (800MHz). Reliance Communications can tackle the high competition
in the Indian market and the management of RCom is planning to fend off the competition with
marketing strategies to fetch new customers. RCom is presently the sixth largest
telecommunication company according to market position. However, the market share is getting
weak as subscribers of RCom are mostly low-revenue customers. In this case, study, how the
new ascent of Reliance Jio poses threat to Reliance Communications will be discussed with new
marketing strategies of Reliance Communications.
2. Brief history of Reliance Communications (RCom)
Reliance Communications (RCom) is an India based telecommunications company and it
has it's headquartered in Navi Mumbai, India. Reliance Communications mostly provides GSM
services (Voice, SMS, 2G, 3G and 4G) to mobile and it has DTH services and broadband
services also. It also offers fixed-line telephone, IPTV and satellite TV services. In the present
Indian market, RCom has more than 85 million subscribers and it is the sixth largest
telecommunications1. RCom is a subsidiary of Reliance Industries and the owner of the company
1 "Reliance Communications | Online Recharge | Reliance Mobile - India's Premier GSM Service Provider".
2017. Rcom.Co.In. http://www.rcom.co.in/Rcom/personal/home/index.html.

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is Anil Ambani. Reliance Communications was established in the year 2002 and operating
income is US$1.1 billion as of in 2017. In the year 2002, RCom mainly launched CDMA
services and in the year 2008, it started to provide GSM services. In 2010 it brought the spectrum
of 3G services and started to give 3G services in 13 circles and in 2012, RCom reduced the price
of data by almost 50%. In 2013, RCom made a partnership with Lenovo to make co-branded
Smartphone. Later in 2016, RCom announced that it would stop its CDMA services across India
and it would migrate all CDMA connections to GSM. One of the biggest decisions of RCom was
the acquisition of MTS brand and in the year 2016, RCom acquired MTS India and SSTL got
16% share of RCom.
Death of Dhirubhai Ambani had spilt between Anil and Mukesh Ambani. After the
splitting in 2005, Anil Ambani got the companies like Reliance Energy, Reliance Infocomm,
Reliance Natural Sources and Reliance Capital. Till 2003, in India upper middle-class people had
an annual income of $11000 to $13000 and they could afford GSM mobile phones cost $60.
India was that time had low income; however, technology was an important factor for them2. In
order to grow in the market, most of the telecommunication companies target mostly upper
middle class and they charged premium pricing. In this scenario, RCom entered the market and it
named the subsidiary as Infocomm. In addition, RCom mainly targeted the mass people by
offering a lower price in calls and texts. It succeeded to grab the second position by the end of
2006 and the successful strategy of Infocomm made the government take a decision in taking the
similar business model of the telecommunications sector. In a previous time, RCom took the cost
leadership strategy by offering the lowest price in calls and they incurred handset switching cost
2 "Rcom Shares Surge On Extension To Service Debt". 2017. The Economic Times.
http://economictimes.indiatimes.com/markets/stocks/news/rcom-shares-surge-over-5-on-extension-to-service-debt/
articleshow/58995594.cms.

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and most important infrastructure cost. Of late, RCom lost the position in the market; other
telecommunication companies like Airtel, Vodafone, Idea and Aircel grab the market share more
than RCom. Recently, Elder brother Mukesh Ambani launched telecommunication company
name Reliance Jio and it affected the growth of RCom and RCom is going to spiral downwards.
3. Background of the study
Reliance Communications has market capitalization of more than 4 billion dollars and
once the company was listed in Asia's top five most valuable telecommunication companies.
RCom Company is India's integrated telecommunication company and it has its customer base of
more than 40 million and in overseas, it is more than 1.4 million. RCom has the corporate
clientele for more than 250 multinational companies and 600 individuals. RCom gives digital
network services to more than 13000 towns and in more than 50,000 villages. RCom has world's
largest next generation IP enabled connectivity infrastructure that contains more than 165000 km
of the fibre optic cable system in India, UAE and Asia Pacific and also in Europe3. However,
these are all the glory of past, in recent time, Anil Ambani faces huge challenges from other
telecommunication providers in India in reaching new users in India. In India, the
telecommunication network is the 2nd largest in the world. As per the statistics on June 2017,
telephone subscribers in the India are 1.2 billion and mobile subscribers are 1.1 billion4. Fixed-
line users in India are 25 million and monthly telephone additions are 7 million. These statistics
show clearly that India has huge potential in the telecommunication industry. RCom wanted to
catch the market and they started with the highest quality of service with low pricing strategy.
3 "Forbes Welcome". 2017. Forbes.Com. https://www.forbes.com/sites/parmyolson/2017/03/20/vodafone-idea-
cellular-merger-reliance-jio/#589becdc1376.
4 "Challenges Ahead For Anil Ambani As Reliance, Aircel Merger Talks Go On". 2017. Businesstoday.In.
http://www.businesstoday.in/current/corporate/reliance-aircel-merger-key-challenges-ahead-for-anil-ambani/story/
237356.html.

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However, in recent time, Anil Ambani's RCom gross debt in 2017 was ₹45,733 crore. The rating
of RCom is reduced to Caa1 that suggests that it is providing poor services to the customers. Lots
of customers are complaining about call drops and they also suggest about the poor internet
connection. In the previous time, RCom has been given the rating of B2 that suggested about
speculative connection. RCom has been showing the weak performance in the last few years and
it goes to the fragile liquidity position and RCom was told to repay ₹25,000 crore to the lenders5.
RCom has been facing the issue of loosing of customers and it was reported to loss approximate
948 crores in the 4th quarter of 2016. However, in the year of 2015, it acquired a net profit of 79
crores.
The reason behind the huge loss of RCom in the last couple of quarters was the
introduction of Reliance Jio. Elder brother of Anil Ambani, Mukesh Ambani launched new
telecom company Reliance Jio and he spent almost ₹1,50,000 crore including services and
spectrum. Reliance Jio has the debt of total ₹49,000 crore including spectrum liability. Reliance
Jio is trying to grab the data users’ market by giving free unlimited class, data and texts. RIL
aims to become debt-free from the profit of Jio and petrochemical sector. RIL has a debt of
₹194,381 crore through cash, mutual fund, marketable securities, deposits and bank deposits.
Mukesh Ambani invested huge money in last three years and it is almost equal to the investment
of RIL entire 35 year’s history. Mukesh Ambani has taken the huge risk in opening Jio and it
offers huge discounts and free services to the users aiming to grab large market share6. Reliance
Jio is the new factor in the telecommunication sector in India as the free services to the users in
introductory period shook the nation and telecommunication industry in India. Jio has been
5 Jan, Sumaira. "Financial Statements Analysis of Idea Cellular & Reliance Telecommunications: A Comparative
Study." Imperial Journal of Interdisciplinary Research 2, no. 7 (2016).
6 Saez, Lawrence. "From Failed Developmental State Towards Hybrid Market Capitalism." The Oxford Handbook
of Asian Business Systems (2014).

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providing threats to Airtel, Vodafone and Idea and the overall expenses of data and calls go
significantly low. In the previous time, an individual used data pack of 1GB for an entire month
and Jio offered 1GB for a user for a single day. This huge changes of users' mentality in using
high-speed $G internet brought huge radical alteration in the telecommunication market7. RCom
has registered in declining the customers' base. The decline is noticed in mainly the data traffic
usage per customer. In 2015, more than 39 million customers used the data connection of RCom,
however, in 2017, it became significantly low estimated to 28 million. Moreover, in a year ago
the data traffic of network used 104,700 million megabits and in 2017, it dropped to 79000
million megabits. On the other side, Reliance Jio introduced the free data and voice calls to the
customers in the introductory period. This ‘freemium' strategy worked and Jio announced 100
crore GB of data traffic per month and almost 200 crore voice with video minutes a day. This
strategy of free data led India to become leading country in terms of mobile data usage. It also
led to use of mobile data usage that is 50% more than China itself8. Jio sets the sigh of India is
becoming a digital country and it is going to be digital Life faster than any other country.
In case of voice users, Jio's entering the market of telecommunication; all the major
players in the Indian telecommunication sector had to cut off the tariff. In tariff wars of voice
pricing, RCom lagged behind as Jio was giving free calls to all mobile connections and telecom
giants Idea, Airtel and Vodafone cut off their prices as well to face Jio. The rise of Jio makes the
worst loser to RCom and RCom failed to retain the customers and the users of RCom started
switching the connection. On the other side, Reliance Jio offers its network almost all the cities
7 Oladipo Adejuwon, Olawale. "Regulation and strategic group dynamics of the Nigerian telecommunications
industry." African Journal of Economic and Management Studies 5, no. 2 (2014): 209-232.
8 Hausman, Jerry, and J. Gregory Sidak. "Telecommunications regulation: Current approaches with the end in
sight." In Economic Regulation and Its Reform: What Have We Learned?, pp. 345-406. University of Chicago Press,
2014.

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in India and it is giving the almost double number of $G towers. Mukesh Ambani stated that by
the end of 2017, Jio will be present almost all the villages, cities and places in India.
Nonetheless, RCom business is witnessing steady downfall in each quarter and subscribers fall to
84.8 million in the fourth quarter of 2016 and it was almost 103 million in the previous quarter9.
RCom was losing the average revenues per customer; this figure goes down from ₹108 to ₹83.
On the contrary, Reliance Jio got more than 100 million customers in just 170 days of launching
the business. It made a record of adding 7 new customers in a second. In the commencement of
business in the telecom sector, Mukesh Ambani's Jio made history to fastest achieved customer
base in Indian history.
Amidst the pressure from Reliance Jio and other market players in the telecommunication
sector, RCom has a debt of 30 billion and it shares just 6.25% market share in the
telecommunication sector. RCom is planning to turnaround with marketing strategies. At first,
RCom is trying to grab the customers with lower tariff and in order to reach a large number of
customers; the organisation is planning to advertise in huge scale. Moreover, to keep away from
Jio's threat, the organisation is planning to merge with Aircel. Aircel has a customer base of 89
million and it has market share of 7.5%, slightly better than RCom. If they merge, RCom will
have better market share and they can fight back to Jio. RCom had 14% of market share in 2013
and in 2017, it has just 6.25%10. In order to keep itself afloat, marketing strategy is needed.
RCom is planning to monetise its assets and they want a long-term contract with setting high
infrastructure. RCom will be doing marketing with taking the initiative of IMC. In order to
9 "Forbes Welcome". 2017. Forbes.Com. https://www.forbes.com/sites/parmyolson/2017/03/20/vodafone-idea-
cellular-merger-reliance-jio/#589becdc1376.
10 Wang, Wei-Kang, Wen-Min Lu, Qian Long Kweh, and Hsiao-Wen Lai. "Does corporate social responsibility
influence the corporate performance of the US telecommunications industry?." Telecommunications Policy 38, no. 7
(2014): 580-591.

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marketing, RCom put new four senior executives in their panel and it wants to taste the success
through merging with Aircel. Revenues of RCom were 0.9% between 2013 and 2015 and on the
other side of Aircel reported to facing loss11. Reliance Jio launched its business on 15th August
2016 and RCom announced 4G services just after two days and RCom revised the plans of tariffs
and marketing technique. Aircel and RCom both have a debt of 28000 crore and 14000 crore₹ ₹
respectively. In order to keep afloat in the market, RCom wants to bring down the tariff and
billing of the customers and they could u additional spectrum.
4. Tentative structure
In the first part, the rationale of the study that is problems facing by RCom in recent time
in telecommunication industry will be explained. In the rational part, the justification for
choosing the subject will be described. Moreover, in the later part, the situational analysis in the
market of telecommunication in regards of RCom will be justified. In this section competitive
position, external and as well as internal analysis will be conducted. In the later part, challenges
faced by RCom in recent time will be explained with description. The marketing strategies
adopted by RCom will be narrated. Moreover, in the final section, the methodology of the study
will be delivered and in this section, methods will be justified for taking these for data collection.
Timeline of conducting the study will be provided in the last section
5. Rationale of the study
Reliance Communications shared their views to the Government and regulators about
taking the corrective measures in order to recover the health of Indian telecommunication sector
as this industry has more than ₹7 lakh crore debts. RCom itself has more than ₹44,000 crore
11 Schaarschmidt, Mario, and Thomas Kilian. "Impediments to customer integration into the innovation process: A
case study in the telecommunications industry." European Management Journal32, no. 2 (2014): 350-361.

10CASE STUDY
debts. The share price goes to 20.50 and RCom has fallen behind for the loan obligations to the
more than 10 banks. 10 Indian's top banks showed the red flags to RCom and they decided not to
lend money. The banks marked categorised RCom as SMA (Special Mention Account) to report
the loans. India's rating agencies are continuously giving a lower rating to RCom and it has been
facing complete competition in Indian Telecom Market. RCom will be getting the clearances
from the agencies and regulators in merging of Aircel and MTS and RCom is going to sell 51%
towers to Brookfield12. The reasons behind the loss of RCom are manifolds. One reason is the
rise of Jio and another reason is disruptive pricing model of RCom. The free offers of other
companies are posing a serious threat to RCom. Once, RCom itself took the strategy of cost
leadership strategy in the inception of telecommunication industry in India. Now, Jio has taken
the same strategy to attract more customers and making the situation worse for RCom. RCom
has been facing several disappointing quarters and management is thinking about revamping of
adjustment of gross revenue, levying the license fees and charge in spectrum usage. Management
of RCom is also thinking about financing packaging for the industry. In a past few months, Airtel
net profit has been decreased by 70% and Idea Cellular saw its successive loss of 325 crores13.
The new launching of Jio put threat almost all companies in the telecommunication industry and
Vodafone slipped its revenue to 0.5%. Jio offers free services and the customers are switching
the telecommunication companies and using mostly Jio’s free connection. Moreover, Jio
performed exceptionally well in the December 2016 and RCom stood in the last place among
first five major players in the Indian market.
12 Jain, Pankaj. "Telecommunication Service Quality Assessment: A Comparative Study of Bharat Sanchar Nigam
Limited and Reliance Communications Limited." Asia-Pacific Journal of Management Research and Innovation 9,
no. 1 (2013): 99-106.
13 Yeboah, Solomon Kofi, Emmanuel Tenakwah Junior, and Jennifer Adonteng-Sakyi. "Effect of Brand on
Consumer Purchase Decision in the Mobile Telecommunications Industry." Imperial Journal of Interdisciplinary
Research 3, no. 8 (2017).

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Figure 1: Internet Speed of major players in Indian Telecommunication Sectors (end of
2016)
(Source: 14)
Figure 2: Download speed of telecommunication operators in India (Average)
14 Internet Speed (2017). https://officechai.com/stories/internet-speeds-indias-top-telecom-operators-ranked/
#sthash.vFdPdOYa.Ev1WD1iK.dpbs.