Reliance Jio to start charging for data, price war to continue
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New Delhi: Mukesh Ambani’s Reliance Jio Infocomm Ltd vowed to offer cheaper tariffs than rival operators when it ends free services to its 100 million subscribers on 31 March, as India’s newest telecom operator seeks to retain users.
Reliance Jio will provide at least 20% more data to users on every tariff plan that its rivals offer, Ambani said on Tuesday, renewing concerns that the bruising price war in the world’s second-largest telecom market by users is unlikely to end soon.
Ambani’s comments indicate that competitive intensity won’t abate even after Reliance Jio ends its free promotional offers. The entry of Reliance Jio, a unit of Reliance Industries Ltd, has already eroded profits of rivals and prompted India’s No. 2 telecom carrier Vodafone India Ltd and Idea Cellular Ltd, the No. 3 operator, to initiate talks to merge their operations.
“This is eventually detrimental for the industry. Even if consolidation happens in the industry, the price war will go on because Reliance Jio is playing the volume game,” said Dharmesh Kant, head of retail research at Motilal Oswal Financial services Ltd.
On Tuesday, Ambani urged people to migrate to Jio’s network before 31 March, when Jio’s promotional Happy New Year offer ends, to avail of exclusive offers. Starting 1 April, he said, Jio will start charging customers, even though voice calls and roaming will still be free.
“Jio is instituting a comprehensive process of monitoring all publicly announced plans from all operators… across the country… on a regular basis. And we will not only match the highest selling tariffs of each of the other leading Indian telecom operators… but we will provide 20% more data in each of these plans,” Ambani said at a press conference.
“This is our promise... In addition to these plans, we will of course have Jio’s own tariff plans, which… we believe… are by far the best in the industry,” he added.
The announcements are mostly a retention strategy as most people were using Jio as a second SIM card and would have moved away once the free offer period ended, said Amresh Nandan, research director at Gartner Inc.
Earnings of telecom companies fell in the December quarter as operators cut tariffs and offered more freebies to retain users. While revenue and operating profit of Airtel declined 5.3% and 9.5%, respectively, Mumbai-based Idea reported a loss of Rs384 crore. Reliance Communications Ltd posted a loss of Rs531 crore.
On Tuesday, Ambani also introduced the Jio Prime Membership programme, which will be open for subscription between 1 March and 31 March for a one-time fee of Rs99. Members will get benefits that were available during the free-offer period for the last six months till 31 March 2018, at an introductory price of Rs303 per month.