Reliance-backed entrant says promotion may go on till rivals stop limiting calls
Reliance Industries has raised the stakes in the multibillion-dollar battle for India’s mobile market, hinting that it will not halt a controversial free service until it believes it is no longer being unfairly targeted by rivals.
The move into telecoms is the boldest gamble to date from Reliance, an oil products group chaired by Mukesh Ambani, India’s richest man. On Friday it announced plans for a new investment of Rs300bn ($4.4bn) in its telecom subsidiary Jio, making a total of Rs1.6tn of funding for what Jio claims is the country’s most powerful mobile data network.
But Jio has been providing all its mobile services for free since its mass launch in September, an unprecedentedly aggressive promotion that rivals such as UK-based Vodafone have condemned as anti-competitive.
Parimal Nathwani, head of corporate affairs at Jio, told the Financial Times that it had been forced to postpone its full commercial launch by other operators’ refusal to make sufficient interconnection points available to its network, meaning that Jio customers have struggled to call users of other networks. He suggested that Jio might not stop its giveaway — which is currently set to end on March 31 — until it is convinced that this practice has ceased.
“We will go commercial when our consumers can be satisfied with the product they are getting,” he said. “Other companies are stopping our traffic . . . They are worried that we are very strong in both data and voice calls, and they are trying to stop us.”
Jio’s allegations of discrimination have been strongly denied by its rivals. But in October, the telecom regulator recommended that its three largest competitors — Bharti Airtel, Vodafone India and Idea Cellular — should be fined a total of Rs30bn. Regulators found a high level of call failures and network congestion for Jio customers, which they said “appears to be with the ulterior motive to stifle competition and is anti-consumer”.
Jio’s critics say the regulator has given the company an easy ride — for example, by allowing it to continue its free service promotion beyond the statutory 90-day limit. Jio obtained approval for the move by arguing that it was undertaking two separate promotions during the six-month period.
Jio’s arrival is already weighing heavily on rivals’ financial outlook: Vodafone in November wrote down the value of its Indian business by £4.3bn, saying competition from Jio meant its returns would be lower than expected.
The bitter fight for India’s mobile data market reflects the huge growth opportunities on offer. Only around one in five Indians has a smartphone, but that figure is growing rapidly. According to a Morgan Stanley report last year, the country is expected to overtake the US as the world’s second largest smartphone market this year.
Chris Lane, an analyst at Bernstein, said: “Jio has money and is committed to raising more. They are not going to want to turn off the free offer until they have solved their voice [call] problem.”
On Monday Reliance reported that its net profit had risen 3.6 per cent from a year earlier to Rs75.1bn in the final quarter of last year, on revenue that rose 16.1 per cent to Rs842bn, helped by rising oil prices.
It claimed that its 4G mobile data network was already the most extensive in India, and pointed to a December test that showed it had average download speeds twice as fast as any other operator. But it complained that the number of interconnection points made available by rival operators was “way below requirement”, meaning that 17.5 per cent of calls from Jio to Airtel customers resulted in failure.
Source: Financial Times
Reliance Industries has raised the stakes in the multibillion-dollar battle for India’s mobile market, hinting that it will not halt a controversial free service until it believes it is no longer being unfairly targeted by rivals.
The move into telecoms is the boldest gamble to date from Reliance, an oil products group chaired by Mukesh Ambani, India’s richest man. On Friday it announced plans for a new investment of Rs300bn ($4.4bn) in its telecom subsidiary Jio, making a total of Rs1.6tn of funding for what Jio claims is the country’s most powerful mobile data network.
But Jio has been providing all its mobile services for free since its mass launch in September, an unprecedentedly aggressive promotion that rivals such as UK-based Vodafone have condemned as anti-competitive.
Parimal Nathwani, head of corporate affairs at Jio, told the Financial Times that it had been forced to postpone its full commercial launch by other operators’ refusal to make sufficient interconnection points available to its network, meaning that Jio customers have struggled to call users of other networks. He suggested that Jio might not stop its giveaway — which is currently set to end on March 31 — until it is convinced that this practice has ceased.
“We will go commercial when our consumers can be satisfied with the product they are getting,” he said. “Other companies are stopping our traffic . . . They are worried that we are very strong in both data and voice calls, and they are trying to stop us.”
Jio’s allegations of discrimination have been strongly denied by its rivals. But in October, the telecom regulator recommended that its three largest competitors — Bharti Airtel, Vodafone India and Idea Cellular — should be fined a total of Rs30bn. Regulators found a high level of call failures and network congestion for Jio customers, which they said “appears to be with the ulterior motive to stifle competition and is anti-consumer”.
Jio’s critics say the regulator has given the company an easy ride — for example, by allowing it to continue its free service promotion beyond the statutory 90-day limit. Jio obtained approval for the move by arguing that it was undertaking two separate promotions during the six-month period.
Jio’s arrival is already weighing heavily on rivals’ financial outlook: Vodafone in November wrote down the value of its Indian business by £4.3bn, saying competition from Jio meant its returns would be lower than expected.
The bitter fight for India’s mobile data market reflects the huge growth opportunities on offer. Only around one in five Indians has a smartphone, but that figure is growing rapidly. According to a Morgan Stanley report last year, the country is expected to overtake the US as the world’s second largest smartphone market this year.
Chris Lane, an analyst at Bernstein, said: “Jio has money and is committed to raising more. They are not going to want to turn off the free offer until they have solved their voice [call] problem.”
On Monday Reliance reported that its net profit had risen 3.6 per cent from a year earlier to Rs75.1bn in the final quarter of last year, on revenue that rose 16.1 per cent to Rs842bn, helped by rising oil prices.
It claimed that its 4G mobile data network was already the most extensive in India, and pointed to a December test that showed it had average download speeds twice as fast as any other operator. But it complained that the number of interconnection points made available by rival operators was “way below requirement”, meaning that 17.5 per cent of calls from Jio to Airtel customers resulted in failure.
Source: Financial Times
