In September 2016, a new mobile network in India started giving away phone calls for free.

It also promised that calls would stay free after the free trial ended.

The network was Jio, owned by Reliance. In under three years, it became India's biggest phone company. This week, Jio Platforms opens India's biggest IPO (measured in rupees), at a valuation of about $108 billion.

Here's how the free calls worked, why the other phone companies could not stop them, and why I think almost no company can copy this.

In 2016, India had 12 mobile operators. The biggest were Airtel, Vodafone and Idea.

Their business was simple. You paid for calls by the minute. Data was expensive, so people barely used it. In 2014, one gigabyte cost about ₹269. People rationed it.

Calls were where the money came from. They brought in about 70% of the big operators' revenue.

Remember that number. Everything Jio did next depends on it.

On 5 September 2016, Jio launched with everything free: calls, data and apps, until the end of the year. It later stretched that to 31 March 2017.

Jio's 2016 launch prices compared with other operators. Source: Reliance Jio launch release, September 2016

The free trial was the part people noticed. The more important part was a promise: once the trial ended, calls would stay free. Jio would only charge for data.

Because of how Jio's network was built. Jio was 4G only. On a 4G network, a phone call is just data, like a WhatsApp call. Carrying it costs the network almost nothing extra.

Airtel, Vodafone and Idea had built their business on older networks where calls were a separate product, sold by the minute. That product was 70% of their money.

So Jio left them with two choices:

Both choices cost them money. That is why the move was so clever. Free calls cost Jio very little. Free calls cost its rivals most of their income.

The big operators tried two things. Neither worked.

First, they made Jio's calls fail. A call from a Jio phone to an Airtel phone has to pass through a connection point between the two networks. Jio said the incumbents weren't adding enough of them, so its calls kept dropping. The regulator, TRAI, agreed. It called the failure rate "exorbitantly high" and recommended a ₹3,050 crore fine on Airtel, Vodafone and Idea.

Second, they called it illegal. Airtel argued that giving a product away is "predatory pricing": a big company pricing below cost to push smaller rivals out of the market. In June 2017, the Competition Commission threw the case out.

The reason is my favourite part of this story. Predatory pricing rules only apply to a company that dominates its market. Jio had under 7% of the market in every region. So the rule did not apply to it.

A rule meant to protect small companies from big ones ended up protecting the newcomer that went on to beat the big ones.

It worked faster than anyone expected.

Jio signed up 100 million customers in 170 days. That is nearly seven new customers every second.

In the quarter after launch, Airtel's profit fell 54.9% and Idea posted its first loss ever. Within seven months, 12 operators had shrunk to five. Vodafone and Idea merged in 2018 to survive. By June 2019, Jio was India's biggest operator, with 331 million customers. Today, India has three private operators left.

Data got cheap for everyone, too. The price of a gigabyte fell from ₹269 in 2014 to ₹11.78 in 2018, a drop of about 95%. At the same time, people used much more data: the average user's monthly data went up almost 300 times between 2014 and 2023.

Data prices fell and usage rose, 2014 to 2018. Source: TRAI, Wireless Data Services in India, August 2019 (Chart 3.6)

Here's the part most people miss. Free was never the business model. It was how Jio paid to win customers, the way other companies pay for ads.

Jio started charging for data in April 2017. In October 2019 it started charging for calls to other networks. Then it raised prices again, in 2019, 2021 and July 2024, when plans went up 13% to 27%.

Some customers left. Jio lost 12.75 million subscribers in the three months after the 2024 rise. But Airtel and Vodafone Idea raised prices at the same time, so customers had no cheaper network to switch to. Jio's average revenue per user went from ₹182 a month in early 2024 to ₹215.6 by mid-2026.

Jio's plan was simple: lose money to win customers, then raise prices once customers had fewer options.

And the customers turned out to be worth far more than the calls. In 2020, Facebook and Google both invested. In total, 13 investors put in more than $20.5 billion for about a third of the company. They weren't paying for a phone network. They were paying for access to Jio's customers, now 533 million of them.

It's tempting to read Jio as "go cheap and win". That's the wrong lesson.

Jio worked because it had three things at once:

Without all three, giving a product away just loses money.

The IPO also shows what those years of losses cost. Up to ₹27,500 crore of the ₹30,213 crore being raised will pay down debt, not fund growth. And investors seem to see a phone company, not the tech platform Jio pitches: at about $108 billion, it would be valued below Airtel. Jio's growth now depends on raising prices without losing customers, which its own prospectus lists as a key risk.

So here's my question for you. If you were running Airtel in September 2016, what would you have done? Hit reply and tell me. I read every one.

This is a product and business story, not investment advice. It is based on public filings and reporting from Reliance, TRAI, Reuters, Business Today and others. If you spot an error, please let me know.

That's it for today,
Sid