Jio’s pricing generates a tectonic shift for competitors and free mobile calls for subscribers
Reliance Industries (RIL) is seeking to change the rules of Telco in India. RIL Chairman Mukesh Ambani started his speech to the board with: “… today, RIL will write history.” He unveiled free mobile calls tariff plan for Reliance Jio aiming to change the telecom industry’s revenue composition.
Jio announced “always” free mobile calls and priced data at Rs 50 ($0.75) /GB, 80% lower than the current industry average of Rs 250 ($3.75) /GB. The company also announced the launch of 4G handsets priced at Rs 3,999 ($60) and personal routers at Rs 1,999 ($30). By owning the entire ecosystem, Jio, backed by Reliance’s retail and content programming – news, entertainment and movies – is armed with a complete offering for the mobile broadband consumer.
From September 5th, everyone can join free till the end of the year.
Rio Data Plans including Free Mobile Calls
|Daily Plan (Occasional User)||Rs 19 ($0.30) – per day|
|Monthly Plan (Low Data Users)||Rs 149 ($2.25) – per month*|
|Monthly Plan (Heavy Data Users)||Rs 4,999 ($75) – per month|
* The Rs 149 plan, available for both prepaid and postpaid users, will offer 300MB data and 100 SMS with a month validity.
- There will be no national roaming charges for Jio users.
- 25% more data for students,
- One million Wi-Fi hotspots across the country,
- “Best-ever international calling rates”
- Unlimited subscription to Jio app and special solutions for enterprises.
With the announcement, competitor investor wealth was wiped off as shares of incumbents crashed. Ratings agency India Ratings and Research revised the sector’s outlook for financial year 2016-17 to “stable-to-negative” from “stable”, as Jio is set to intensify competition, which will squeeze market share, margins and credit metrics of incumbents. In a note, Credit Suisse said Jio’s launch has been one of the key worries for the past couple of years, and this is turning out to be quite negative. Shares of Bharti Airtel declined 6.4% on the BSE to Rs 310.70, Idea Cellular lost 10.5% to Rs 83.70 and Reliance Communications fell 8.8% to Rs 49.15.
Reliance Industries, too, fell 2.7% to Rs 1,029.15. Effectively, by opting for Jio plans, the average monthly mobile bill for a mid-to-high-end subscriber could come down by 50-60%, according to CRISIL Research estimates.
Quite clearly, Reliance is betting volume through a material increase in data usage to offset lower tariffs, Crisil said.
Reliance, has been at war with incumbents over interconnect bandwidth, hoped competitors would not impair consumer experience and grant them the requisite interconnect points. Bharti Airtel responded with a statement that said: “We welcome Reliance Jio’s call to leading operators to work together. As a responsible operator, we will fulfill all our regulatory obligations as we have always done.”
A Vodafone India spokesperson said, “We have always offered great value to our customers, backed by excellent customer service, a nationwide presence, and Vodafone SuperNet – our best network ever. We will continue to do so for our hundreds of millions of customers across the country.”