India's Reliance Jio adds 100m wireless customers
New entrant's big discounts stoking price war
MUMBAI (NewsRise) -- Reliance Industries' wireless venture said it has added 100 million customers in less than six months since its launch and will offer steep discounts for a year, further exacerbating a price war in one of the most competitive telecom markets in the world.
Billionaire Chairman Mukesh Ambani said Tuesday his Reliance Jio, which has been offering free fourth-generation wireless data since the Sept. 5 launch, will start charging customers from April 1. The operator also vowed to match the best tariffs of rivals with an offer for 20% additional data.
The move will intensify the price competition that has already crimped the industry's revenue and profits in the last six months. Jio rolled out services with free voice and data offerings until December, but subsequently extended the offer for another three months with a target of achieving 100 million subscribers.
Jio's entry with freebies has shaken India's telecom market, where mobile phones tariffs were already among the lowest in the world. Last month, Bharti Airtel, India's largest mobile phone company, reported a 55% plunge in October-December profit after posting its first decline in revenue since listing. Third-ranked Idea Cellular slipped into a loss, its first ever since listing in 2007.
As part of the offer, customers signing up on Jio network on or before March 31 have the option of continuing to get the existing unlimited services for a year for 303 rupees ($4.5) a month and a one-time fee of 99 rupees.
According to some analysts, Jio's move to start charging the customers may bring some relief to rivals.
"From here on, the case for the incumbents improves a little bit in terms of their ability to go into the market and have attractive plan and still retain the subscribers," Naveen Kulkarni, an analyst at PhillipCapital, told CNBC-TV18 . "There will be a lot of pressure on the tariffs, but from the perspective of ability to retain customers, I feel that that is going to improve from here on."
The rising pricing pressure from the new entrant has also spurred a consolidation in the sector which at one point had as many as 12 operators.
Last month, Idea Cellular, backed by billionaire Kumar Mangalam Birla, opened talks with the U.K.'s Vodafone Group for a potential all-share merger. A combined Vodafone-Idea group would have 43% revenue market share, ahead of the 33% share of Bharti, say analysts.
Jio has been pumping in billions of dollars to expand its network in the second-largest mobile phone market in the world. After spending almost $25 billion since setting up its high-speed internet services business, the company said last month it would raise an additional $4 billion through a rights issue to fortify its network.
On Tuesday Ambani said Jio's network will cover 99% of the country by the end of this year.
Shares of Reliance Industries gained 1.36%, while that of Bharti Airtel lost 3.38% and Idea Cellular closed 0.37% lower in Mumbai trading. The benchmark S&P BSE Sensex rose 0.35%.
--Dhanya Ann Thoppil