Outside a tiny Reliance Industries Ltd store in a trendy Mumbai neighborhood, residents queued for hours last week for a new SIM card promising free data — and a dramatic reshaping of the Indian mobile landscape.
Mukesh Ambani, India’s richest man, announced his long-awaited Reliance Jio 4G network with an audacious free service for the rest of the year, followed by vastly cheaper data plans and free voice calls for life.
Anticipating the shake-up, rival Bharti Airtel Ltd has already slashed 3G and 4G prices by up to 80 percent while Vodafone Group PLC has heaped more data into its prepaid tariffs.
Photo: AFP
India’s mobile market is plagued by patchy reception, frequent call drops, erratic pricing and 3G internet speeds that fluctuate wildly. However, analysts said competitors will struggle to match the deep pockets of a startup backed by Reliance Industries, the energy-to-chemicals conglomerate.
With his US$20 billion investment in mobile, Ambani is betting on a fast-evolving Internet landscape in a country where nearly 1 billion people are still not online.
Public Wi-Fi is scarce and broadband access is weak, with many rural areas lacking the infrastructure to deliver high speeds.
Most of the hundreds of millions of Indians coming online over the next decade will start with smartphones, something being avidly targeted by tech giants Google and Facebook Inc.
Ambani hopes to win over those who have never had an Internet connection and for whom mobile data was previously unthinkably expensive, with a high-speed 4G covering 90 percent of India by March next year.
“This is going to change the dynamics of the game,” Mumbai-based Ipsos Business Consulting research director Bhasker Canagaradjou said, adding that data use was already growing at an “exorbitant” rate.
Under the Reliance plans, a gigabyte of data costs as little as a tenth of the previous 250 rupees (US$3.74). The company seeks to upend a market at present two-thirds dominated by three players — Airtel, Idea Cellular Ltd and Vodafone — saying it aims to secure 100 million customers in the shortest possible time.
Combined with ever-cheaper smartphones, Reliance’s new 4G network will swell the number of Internet users and prompt those already using data, millions of them on sluggish 2G networks, to upgrade.
As the battle heats up, with mobile providers eschewing profitability to gain a foothold, analysts say smaller providers such as Tata Docomo or Aircel Ltd might be forced to merge or go under.
“Jio will make a major dent and lure away consumers in the near future,” said Nikhil Pahwa, founder of Medianama.com, a digital media news site. “With increased competition and price wars, many smaller players will find it difficult to survive.”
However, while freebies have won it attention, the proof will be in the service, analysts said.
While low income customers — who often use two SIM cards in the same phone to hop between plans — might switch straight away, better-off users are more likely to wait and see.
Others suggest it is an eye-catching gimmick and that, as with most things, free does not really mean free.
Mumbai-based SAMCO Securities research director Umesh Mehta said that “hidden costs and indirect charges” meant the savings would not be as great as the marketing campaigns suggest.
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