Reuters: Reliance Industries unveiled its Jio telecom network on Thursday, touting free calls and rock-bottom data prices that sent shares of established telecom players into a nosedive on fears of an all-out price war.
Reliance Chairman Mukesh Ambani, India’s richest man, told the energy group’s annual shareholders’ meeting that services on the Jio network would be available for free until 31 December in a “welcome offer”.
Reliance, which has been giving freebies for the past few months as part of network testing, did not say when it would start billing customers.
Reliance, one of India’s biggest conglomerates which gets most of its revenue from its sprawling oil and gas business, has in recent years expanded into more consumer-facing markets such as retail and telecoms as growth slows in its core business.
The company, which secured telecom airwaves in 2010, has so far invested more than $20 billion on building a nationwide network and has pledged to offer affordable services to price-conscious Indian customers.
Ambani, who was interrupted by repeated rounds of applause as he took shareholders in a packed auditorium through Jio’s ambitious rollout plans, free countrywide roaming offering and more, vowed to “transform India from a high-priced data market to one with the lowest data rates anywhere in the world.”
Jio could make Reliance a big provider of telecoms and internet services across India - a nation of one billion mobile phone subscribers – and is a key plank of Ambani’s strategy, even though the business is unlikely to add significantly to group profits any time soon.
Jio will effectively price one gigabyte of data at about 50 rupees on average, about one-fifth of what rivals charge, Reliance said in a statement.
Ambani set a target of 100 million customers for Reliance Jio “in the shortest possible time”, without specifying.
Shares in India’s No. 1 wireless carrier Bharti Airtel Ltd dropped 6.3% while smaller rival Idea Cellular fell 10.5%, on fears that Jio’s aggressive rates will trigger a price war. Incumbents have already started lowering data prices ahead of Jio’s entry.
Bharti Airtel said: “We welcome Reliance Jio’s entry to the digital world and wish them the very best,” but made no comment on the new entrant’s price plans. Idea did not comment.
Still, one telecom analyst with a foreign brokerage said Jio would face challenges in luring low-spending phone users to its network.
Jio’s cheapest of 10 plans starts at 149 rupees ($2.22) a month and offers just 0.3 gigabytes of data, while the next monthly plan costs 499 rupees for 4 GB of data. It will also offer a 299 rupee plan with two GB of data which has to be used in 21 days.
By comparison, the monthly average revenue per user for India’s telecoms industry, where many still use basic phones, was 127 rupees in the quarter ended March, according to latest data available with the sector regulator.
“It is definitely aggressive and will hurt the incumbents,” said the analyst who declined to be named as he is not authorised to speak to media. “But it’s not like it’s going to push everyone else out of the market.”