India’s Reliance Industries unveiled its new 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’s Chairman Mukesh Ambani, India’s richest man, told shareholders at the energy giant’s annual shareholder meet that services on the new network, dubbed Jio, would be available for free until Dec. 31 as it continues network tests. He did not say when the services would be launched commercially.
Reliance, one of India’s biggest business houses which gets most of its revenue from its sprawling oil and gas business, has in the recent years expanded into more consumer-facing markets such as retail and telecom as growth in its core business slows.
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 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 future strategy even though the business is unlikely to add significantly to consolidated profit any time soon.
Jio will effectively price one gigabyte of data at about 50 rupees for some users, about one-fifth of what rivals charge, Ambani said. Data charges will fall even further for heavier users, he said.
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 percent on Thursday, while smaller rival Idea Cellular fell 10.5 percent, on fears that Jio’s aggressive rates will trigger a price war in the sector.
The incumbents have already started lowering data prices ahead of Jio’s entry.
Still, a telecom analyst, who declined to be named, said Jio would face challenges in luring low-spending phone users to its network.
Jio’s cheapest plan starts at 149 rupees and offers just 0.3 gigabytes of data and the company’s next plan up costs 499 rupees, while a majority of India’s phone users who still have basic phones spend less than 200 rupees a month on telecommunications services.
“It is definitely aggressive and will hurt the incumbents,” he said. “But it’s not like it’s going to push everyone else out of the market.”
($1 = 66.9475 Indian rupees)