Reliance Jio is making telecom rivals miserable

Reliance Jio's much-anticipated launch, offering rock-bottom data prices is a potential game-changer that could fuel an all-out price war in a market of 950-odd million mobile subscribers in India.

The world's demand for digital oxygen, that is data, is witnessing a spiralling growth. Jio's mission is to meet this exploding need for India, Ambani said.

Free voice calls and data services at very low tariffs resemble a back-breaking strategy that Reliance Infocom had adopted 13 years ago.

In 2003, Mukesh Ambani-controlled Reliance India Mobile stormed the market with Monsoon Hungama, a scheme that offered a mobile connection with a handset at Rs 501.

Even as cooperators jostled to keep their customer base intact, tariffs plummeted, making mobile phones affordable for millions and breaking down class barriers.

From about Rs 5 then, a call now costs as low as 45 paise per minute despite intervening years of inflation and growth that prevented the rupee from soaring.

With voice calls no longer expected to remain the dominant money spinner, a similar tariff war looks imminent among data services as browsing battles move to palmtops.

Reliance has spent more than Rs 1.50 lakh crore till now to set up what will be the world's largest 4G network. It already connects 2,00,000 villages and 18,000 towns and, by the end of March next year, the telco will cover 90 per cent of India, according to Ambani.

Reliance Industries has delivered a knockout punch on the pricing of voice and data tariffs. No doubt tariff plans for voice and data are going to be a game-changer for (the) telecom industry, said Dharmesh Kant, head of retail research at Motilal Oswal Securities.

"All of us operators will compete vigorously in market. Will inspire each other to rise to greater heights," Ambani said throwing down the gauntlet at rivals.

Reliance Jio has placed its bets firmly on low tariffs to push data volumes, which is evident from the strategy of making calls free. The move will force incumbents to lower rates.

We foresee operators gradually moving towards simpler plans wherein subscribers would be offered unlimited voice and fixed data access for a lump sum, rather than the forest of foggy options available today.

Tariffs will tumble, and we project average data realisations halving to less than 10 paise per MB by 2017-18, compared to less than 20 paise per MB currently, stated Ajay Srinivasan, director at Crisil Research.

The data sector is still very much in its infancy and remains a fledgling line of business for operators. This will make it easier for incumbents to adjust their data tariffs to match Reliance Jio's offer.

The Indian telecom sector is at an inflection point of massive data adoption, repeating the precedence of the voice market growth trajectory (2007-2011).

This will necessitate continued investment in the key resource spectrum, during the coverage expansion phase.

Almost a decade-and-a-half after it erupted (and then died down), the battle for supremacy of Indian radiowaves between Mukesh Ambani and Bharti Airtel's Sunil Mittal is finally coming to a boil.

The two companies have since locked horns in a bitter battle over so-called Points of Interconnection (PoIs) that allow calls between networks to be completed.

Interconnection enables mobile users to make calls to customers of other telecom networks and therefore remains crucial for the smooth functioning of mobile services.

Jio has accused incumbent operators of providing far less than adequate PoIs needed for its users to complete a call to a rival network, while the operators have charged the newcomer for unleashing heavy free traffic on their networks.

Jio has announced that its customers will enjoy free voice calls for life, while data, currently free, would be available at a fraction of the prevailing market rates post December 31.

In a statement issued on September 23, the company had alleged that over 12 crore calls failed daily between Jio and the networks of Airtel, Vodafone and Idea.

As per quality of service rules, not more than five calls in a set of 1,000 should fail due to network congestion.Bharti has countered that the problem is with Jio's own network. The Telecom Regulatory Authority of India (TRAI) is now looking at the flow across PoIs to find out who is lying.

There have also been reports that Bharti is not allowing its subscribers to port their numbers (under the mobile number portability (MNP) facility) to the Jio and other networks. If proved true, this could again result in action by TRAI.

Asked by the regulator to explain high level of call failures, incumbent operators Bharti Airtel, Vodafone and Idea have cited free voice calls offered by Reliance Jio as the reason for heavy network congestion.

The three companies made this submission in reply to showcause notice by TRAI, which is now in the process of examining them and set to take a view on the issue in a week.

The incumbent operators and Reliance Jio appear to be in the process of settling their differences over providing enough points of interconnection for calls from the latter's network to go through to their own subscribers.

In anticipation of Reliance Jio Infocomm Ltd's launch, Bharti Airtel Ltd cut data rates by as much as 80 per cent, and got the industry group Cellular Operators Association of India (COAI), of which it is a part and which it practically controls, to lobby the government against various aspects of Jio's soft launch.

"Competition has to gear up. Operators have to make increased investment both in terms of coverage and quality," Rajan Mathews, director-general, COAI, told the press.

"The battle lines have now been drawn. You have Jio with Reliance Communications, Aircel and MTS on one side and Bharti, Vodafone and Idea Cellular on the other," he added.

India's top incumbent carriers have told the Prime Minister's Office (PMO) they are in no way obliged or in any position to entertain Reliance Jio Infocomm's requests for interconnection points as they do not have either the network or the financial resources to terminate the latter's humongous volumes of potentially asymmetric voice traffic.

The lobby body, which represents India's biggest GSM carriers, further warned that existing telecom companies would go into liquidation long before this reduced weighted average voice realisation is reached.

"Reliance Jio may well make up some part of this massive voice cross-subsidy by way of data revenue realisations, by way of customer acquisitions/churn, but it becomes abundantly clear that the overwhelming burden of this free lunch is sought to be passed on to rival operators through tariff manipulations, which exploit the Interconnect Usage Charge (IUC) regime, and offload tsunamis of asymmetric voice traffic that will choke and financially destroy competition," said Rajan Mathews, director general of the COAI.

Unloading incoming voice traffic from a (potential) 100 million, Reliance Jio customers can lead to the weighted average voice realisation of existing operators plunging from 30-40 paise per voice minute to 22-25 paise per voice minute or even lower, said COAI in its second letter in less than a month to Nripendra Misra, principal secretary at PMO.

Existing operators would be compelled to handle voice traffic that is double their total present levels, states the COAI.

Also read - Reliance Jio's entry is likely to benefit Bharti Airtel, Idea