A price war is sure to ensue as the new venture attempts to aggressively build a customer base in the country, the world’s second-largest mobile services market after China. Reliance Jio will want to snatch users from incumbents such as Airtel and Vodafone .
Already, operators in India’s ultra-competitive market offer among the lowest mobile tariffs in the world. Indications are that Reliance Jio could drive prices further down all round, offering 4G-compliant devices at 4,000 rupees (about $63), and voice & data services from 300 -500 rupees ($5-8) a month.
The oil-to-retail conglomerate, owned by Forbes billionaire and India’s richest man, Mukesh Ambani, is now the largest holder of spectrum in India and the first operator to hold a pan-India licence. Earlier this year, Reliance aggressively bid in a government auction to secure additional spectrum and spent nearly $2 billion for airwaves in 13 regions across India.
This will allow Reliance Jio to blitz the country with 4G telephony and digital broadband services, its offerings ranging from digital commerce, cloud storage, digital payments, news and access to high definition TV and movie content.
Challenges are aplenty. Reliance Jio will need to wean away the top one-third of the India’s mobile users from rivals as these users account for over two-thirds of the industry’s revenues. As it struggles to ensure seamless coverage, Reliance Jio has only months left to ensure the roll-outs within the five-year period as stipulated by the telecom regulator at the time of the 2010 auction.
“Our effort to provide 4G (fourth generation) services across the country is gathering momentum,” Ambani said last week in a letter to his shareholders in the company’s 2014-15 annual report. Reliance has spent around $13 billion so far and will roll out physical infrastructure in 880 cities and towns countrywide. At the annual shareholders’ meet, Ambani said Reliance Jio is among the largest ‘transformational greenfield telecom initiatives’ anywhere in the world. It will play a key role in catapulting India into the Top 10 countries in the world from its current 142nd rank in internet penetration, he said.
This is Reliance’s re-entry into the telecom business. Its previous venture called Reliance Infocomm went to younger brother Anil Ambani when the two brothers had a bitter parting and split businesses. The previous operator had stirred the market by dropping call rates to new lows, comparable to the price of post cards used by India’s poor. The two brothers have made up since and out of that emerged an understanding that Mukesh Ambani’s group could enter the telecom business
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