India's richest man storms into phone industry with free calls

Mukesh Ambani (right), chairman of Reliance Industries Ltd, poses with his son Akash before addressing the company's annual general meeting in Mumbai, India on Sept 1, 2016.
Mukesh Ambani (right), chairman of Reliance Industries Ltd, poses with his son Akash before addressing the company's annual general meeting in Mumbai, India on Sept 1, 2016. PHOTO: REUTERS

MUMBAI (BLOOMBERG) - Billionaire Mukesh Ambani said his Reliance Jio Infocomm unit will offer mobile phone calls for free, pressuring existing carriers to follow suit in what's already one of the world's lowest-priced wireless markets.

Jio's service will debut Sept 5 and will be free until December, after which the company will begin charging subscribers as little as 149 rupees (S$3.03) a month for data, India's richest tycoon said on Thursday at the annual general meeting of his Reliance Industries flagship. Jio will also not charge for roaming calls within India, he said.

"The era of paying for voice calls is ending," said Mr Ambani. The service will be offered on Jio for life, he said.

Shares of India's two biggest listed carriers, which have been bracing for months for the entry of Jio, tumbled on concern they face losing customers to Ambani. At Bharti Airtel, the market leader, voice calls account for about 70 per cent of wireless revenue in India.

Operators including Airtel have already cut tariffs for data plans by as much as 67 per cent and added fourth generation, or 4G, services in an effort to prevent customers from defecting to Jio.

Mr Ambani's mobile service, part of Reliance's plan to diversify from the oil and petrochemicals that comprised about 98 per cent of profit last year, has been undergoing testing for at least nine months with a limited number of users and was initially scheduled to start in December 2015.

Data services have emerged as key to the Indian market, where almost 90 per cent of 151.09 million broadband subscribers access the Internet via mobile devices, according to the Telecom Regulatory Authority of India. Mr Ambani on Thursday announced a target to draw 100 million customers to Jio "in the shortest possible time".

He said he expects data usage to reach 2.5 billion gigabytes a month on the network.

Jio will offer only fourth-generation services in India, the world's second-largest smartphone market. Ambani has said he plans to provide improved mobile phone services and help transform India's digital ecosystem.

Airtel's shares fell as much as 9.1 per cent, while Idea Cellular was down 9.3 per cent and Reliance dropped 1.3 per cent in Mumbai.

An e-mail sent to Prem Subedi, Bharti's spokesman, seeking comments on Jio offering free voice calls and national roaming wasn't immediately responded to. An e-mail and a phone call to Pragnya Ram, group spokeswoman for Aditya Birla Group that controls Idea Cellular, weren't immediately answered.

Airtel on Monday began offering customers unlimited 1 gigabyte data recharges at 51 rupees each on paying a flat 1,498 rupee charge for a year. It previously slashed Internet fees as much as 67 per cent for prepaid services. Vodafone's local unit and Idea Cellular, the country's second and third-biggest operators, have also cut data prices. The top three operators together control about 60 percent of the Indian mobile market by users.

Jio had 1.5 million customers in its beta tests, Anshuman Thakur, the company's head of strategy, told reporters July 15.

Mr Ambani said in March that Jio would offer mobile broadband speeds that are 40 to 80 times faster than current average speeds and the network has been designed to provide 10 gigabytes of monthly data for every user.