With Reliance Jio, Mukesh Ambani fires warning shots to rivals
Mukesh Ambani’s Reliance Jio is threatening to take the voice business away from its nearest rivals Bharti Airtel, Idea Cellular and Vodafone amid shakeout fears in telcos
Latest News »
- Cyberattack hits UK Parliament, limiting access to MPs’ emails
- Narendra Modi will convey Indian IT firms’ role in US to Trump: Vishal Sikka
- Gujarat Congress leader Shankarsinh Vaghela hits out at party leadership
- Yogi Adityanath govt launches ‘informer scheme’ to curb female foeticide
- World Taekwondo Federation changes its name over ‘negative’ acronym
Taipei/Singapore: Reliance Industries chairman Mukesh Ambani isn’t a rebel. He’s a realist.
“The era of paying for voice calls is ending,” Ambani told investors at the company’s annual general meeting on Thursday, while inaugurating his telco start-up Jio. To his entrenched Indian rivals, all of whom are still wedded to the idea of charging customers for phone calls, Ambani’s words should be bone-chilling. Elsewhere, they are an accurate reflection of the global state of play.
Critics may dismiss Ambani’s offer of free voice calls as a marketing gimmick, while supporters might see it as a clever move to grab the 100 million customers he has vowed to sign up in record time.
Neither camp is entirely wrong. But what the oil and gas magnate is really doing is bringing India in line with the rest of the world. Rather than the telephone networks without wires they once were, mobile systems are increasingly internet gateways.
Fewer and fewer people actually use their mobile devices to talk, and those who do are increasingly utilizing services such as WhatsApp, Skype or Viber, which use a data connection.
Even for fixed lines, a growing number of companies have recalibrated their systems to allow phone calls over data using VoIP.
Like many developing countries, India is set to skip a few generations of technological evolution.
Whereas in the West, most consumers first got online via desktop PCs before migrating to laptops and then handsets, the majority of Indians’ initial log-on will be wireless.
And with home-grown products like Indus OS and Hike Messenger catering to local tastes, there’s every reason to believe domestic developers will make it easier for the masses to be part of the mobile internet revolution.
None of this is good news for the incumbents in India’s crowded mobile market. They had expected Jio to attack their growing data business, and were cutting their own charges preemptively. Instead, the assault came in voice—their mainstay.
Jio’s entry-level plan
Ambani’s Rs.149-rupee-a-month entry-level plan is lower than the Rs.196 Bharti Airtel earned from an average Indian mobile user in the June quarter, of which 71% came from voice calls.
In other words, the customer who spent Rs.139 just to talk to someone might be swayed to try a product that’s only slightly more expensive and comes packaged with 300 megabytes of data—not to mention the lure of free movies, music and live TV until the end of the year on Reliance’s app suite.
Bharti Airtel shares fell as much as 9% after Ambani’s announcement; smaller rival Idea Cellular slumped 11%. Vodafone stock in London declined as much as 3%. Together, the trio control more than three-fifths of the Indian market.
For the existing players to maintain profitability while weaning their customers off voice would mean fresh investment. It’s unclear if creditors have the appetite to finance billions of dollars of new expenditure. Debt levels are already very high, and the regulatory environment is slippery. There’s no certainty that Bharti, Idea and Vodafone will continue to get paid termination charges for calls by Jio customers to their subscribers either.
It’s almost a given that data charges in India are headed for a steep fall. That’s a revolution the incumbents were bracing for. But by threatening to take their voice business away, Ambani has given his competitors a glimpse of a different, and much harsher, reality.