Reliance Jio stirs market with free calls

by Shobha September 2, 2016 0 Comment

Mukesh Ambani, Chairman of oil-to-telecom conglomerate Reliance Industries, offered customers lifetime free voice and roaming and unlimited data under the Reliance Jio (RJio) Welcome Offer starting September 5.

“We Indians have come to appreciate and applaud Gandhigiri; now we can all do Datagiri, which is an opportunity for every Indian to do unlimited good things, with unlimited data,” Mr. Ambani told shareholders at Reliance’s annual general meeting on Thursday. He used the occasion to announce the commercial rollout of Reliance Jio’s fourth-generation mobile phone services.

As part of RJio’s introductory offer, users will have access to unlimited LTE data and national voice, video and messaging services along with the full bouquet of RJio applications and content, free of cost up to December 31. “RJio’s pricing is not just highly competitive but also challenges the prevalent tariff structures as RJio will offer free voice calling and SMS services bundled with the data tariff,” said Tanu Sharma, Associate Director at India Ratings. “This could hurt the voice tariffs and average revenue per user (ARPU) of existing operators as well as push them to match the pricing, in a bid to protect their market share.”

“The era of paying for voice calls is ending. All voice calls for Jio customers will be absolutely free,” Mr. Ambani said. “Jio will put an end to voice call charges in India.”

RJio will offer data services free till December, after which it will offer 10 tariff plans, starting at Rs.19 a day for occasional users, Rs.149 a month for low data users and Rs.4,999 a month for heavy data users and average data prices of Rs.50 per GB, which would be amongst the lowest in the world. RJio filed its tariff plans with the telecom regulator TRAI. It may signal an all-out price war among the telcos.

“This announcement will unleash price wars among telcos and users can expect cost of data going down in the range of 25-35 per cent,” Sanchit Gogia, CEO at Greyhound Research said. Rajan Mathews, Director General at Cellular Operators Association of India representing incumbent GSM operators said that while their might be some porting to RJio, the tariffs wouldn’t deter competition. “Other than Rs.19-per-day tariff, most of the other price points in the mid to high range plans are already being matched by the incumbents in some form or fashion,” he said. Both Mr. Mathews and Mr. Gogia pointed out at possibilities of people opting for two SIM cards. “With Reliance Jio’s network chiefly built for data, voice quality may not compare to its peers, hence users are likely to opt for different sims for voice and data,” Mr. Gogia said.

Mr. Ambani devoted more than an hour of his 90-minute speech for explaining the features of RJio’s services to the jam-packed hall of shareholders at the AGM. He aims to have in excess of 100 million subscribers by December 2016 by targeting to add more than a million subscribers each day starting September 5 under the Welcome Offer. If it achieves the goal, RJio would be poised to come abreast of younger sibling Anil Ambani’s Reliance Communications, currently the fourth-largest operator by subscribers. RJio plans to charge for its data services from January 2017.

CRISIL estimates that RJio’s plans could help shrink average monthly mobile bills for mid-to-high end subscribers by over 50 per cent.

“Quite clearly, Reliance is betting on humongous volume play through an increase in data usage,” CRISIL Research wrote.

India Ratings said RJio’s entry will intensify competition and squeeze the market shares, EBITDA margins and credit metrics of Bharti Airtel, Vodafone and Idea Cellular. The incumbents have made pre-emptive price cuts by offering higher data volumes for the same price. Dharmesh Kant Head – Retail Research, Motilal Oswal Securities said RJio’s ability to achieve breakeven would be a concern.

Reliance Jio stirs market with free calls

Shobha

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Reliance Jio stirs market with free calls

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