RIL's second coming in telecom was always expected to be disruptive, but chairman Mukesh Ambani still managed to stun customers and competitors alike with an announcement that Reliance Jio would offer free voice calls and dirt-cheap 4G data services on its network. The statement could sound the death-knell for voice tariffs and prove a gamechanger for the industry .
“The era of paying for voice calls is ending,“ Ambani told shareholders at the Reliance Industries AGM. “From September 5, India will change forever,“ he said, announcing the date of Jio's formal launch. Jio's data packages are priced at nearly one-fifth of what is charged by existing mobile operators. “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,“ he said.
Ambani's tariff offerings, spread across 10 main plans, promise data prices as low as Rs 50 per GB against the average Rs 250 per GB charged by incumbents. He said this could go down to as low as Rs 25 for those who would use it extensively . “We have price points starting from Rs 19 for the occasional data user, to a monthly Rs 149 plan for the light data user, all the way up to a monthly Rs 4,999 plan for the heaviest data user. I believe these are the absolute lowest data rates anywhere in the world,“ he said. Roaming charges would also be abandoned, he said, adding that porting into Jio can begin with the launch of commercial services.
If the aim was to create shock and awe in the minds of investors and rivals, Ambani was bang on. During his 45-minute speech, the combined market value of Airtel, Idea and RCom fell by around Rs 13,000 crore.RIL stock also dipped by nearly 3% over concerns relating to execution risks and losses in the initial months. One of the clinchers for the Jio service, which bundles a host of content packages such as movies, TV programmes and magazines, has been a free data service package that is valid till the end of the year. But the freebie did not find resonance with rivals as industry lobby COAI termed it “predatory pricing“ to undercut competitors.
The RIL chief, however, said the “welcome offer“ would help the company iron out defects in the network. Reliance Jio has been blaming rivals for not providing sufficient interconnect points to make uninterrupted calls, something Ambani reiterated in his speech on Thursday when he asked competitors not to “misuse their market power by creating unfair hurdles“.
Ambani had entered the telecom business with the same chutzpah when he launched Reliance Infocomm (now Reliance Communications) in 2002. However, he had to relinquish the telecom business to younger sibling Anil as part of the family settlement to split the Reliance empire in 2005.But he always nurtured a desire to return to the cut-throat telecom sector. Ambani re-entered the telecom sector after the ending of the non-compete agreement with Anil in 2010. In fact, soon after the cancellation, he snapped up Infotel for Rs 4,800 crore, which had just acquired 4G spectrum.
As in 2002, affordable data is the backbone of Ambani's grand plans, which has seen him take a bet of nearly Rs 1.34 lakh crore to set up a massive network built across telecom towers and fibre optics.The build-up to Jio's launch has already seen deep tariff cuts being announced by existing players, and Thursday's announcement will force rival telcos to sweeten the deal for consumers.
But his return to telecom has been marked by controversies. In the run-up to the launch, Ambani had been accused by existing telcos of receiving undue favours from regulator Trai, including carrying out “unauthorized commercial operations“ during the test phase. Unfazed, Ambani appeared excited when he unveiled the mega plans to shareholders and the audience that included mother Kokilaben, wife Nita (also a board member of Reliance) and children Akash, Isha (both board members of Reliance Jio) and Anant. “I start with the newest and youngest member of the Reliance family Jio,“ he said.
Ambani sought to drive home the message that his service was superior to that provided by existing networks. “Most legacy telecom providers have not built their networks for data or the internet. They have built their network to support voice and SMS...they have had to retrofit their legacy networks to deal with data and IP as an afterthought,“ he told the packed audience at the Birla Matoshri Auditorium. “As they are confronted with the explosion of data usage, legacy telcos have been trying to push this `unnatural act' to its breaking point,“ he said, in an apparent reference to nagging issues of call drops and poor broadband speeds experienced with most of the Indian te lecom operators. He cited ambitious numbers for his fledgling business and asked his team to corner 100 million subscribers in a record period. However, market analysts said his plans may be a little far-fetched in present circumstances as Reliance Jio is a “4G only“ service and cannot be availed of by the large majority of users who use 2G or 3G phones.