Business

Jio: Telecom giant Reliance sparks India price war

Jio merchandise
Image caption Jio is owned by Reliance Industries

The Indian telecoms giant, Reliance, is offering smartphone users what it says is the cheapest mobile data network in the world.

The arrival of Jio - the new mobile network - has ramped up the battle among Indian telecoms firms to win customers.

High-speed 4G internet is by no means new to the country, but Jio is offering it at prices well below its rivals.

The company says it hopes to reach 90% of India's population within a year.

Extremely competitive

The ambitious plan is backed by the country's largest private sector firm, Reliance Industries.

Chairman Mukesh Ambani recently used the firm's annual general meeting to announce his plans for Jio's 4G services.

It has taken them six years to set up the infrastructure for Jio.

Image copyright Getty Images
Image caption Reliance Industries chairman Mukesh Ambani said he wanted to bring telecoms revolution in the country

Analysts say Jio is likely to make India's telecoms sector extremely competitive.

As soon as Mr Ambani unveiled his plans, the share price of India's biggest telecom company, Bharti Airtel, fell 8.5% - losing $1.3bn (£975m).

Idea Cellular's market value also dipped by 7%, wiping more than $500m of its value.

Even Reliance's own stock witnessed a dip of 3%.

Undercutting competitors

The firm had further troubles because of its controversial newspaper advertisements with many taking to social media to criticise Jio for using Prime Minister Narendra Modi's photograph.

Image caption Many criticised Jio for using Prime Minister Narendra Modi's picture in its advert

Critics have also accused the firm of unfairly undercutting competitors.

Jio's cheapest plans begin at just over $2 a month. Initially, all users will get data, voice, video and a host of applications and content for free until next year.

But some analysts have expressed concern at Jio's price war.

Sanchit Gogia, analyst at Greyhound Research, said he was worried about Jio getting a monopoly in the market.

"One business house having controlling stakes in start-ups, content and even in telephony, mobile and broadband services - that does worry me. And it should worry the regulators as well."

Image copyright Getty Images
Image caption Mr Ambani said he supported Mr Modi's vision of taking the power of data to India's remotest corners

Reliance is entering the market at a time when the telecom industry has a combined debt of over $50bn.

Mr Gogia said India was an open market and needed at least three to five players for prices to normalise in the future.

The price war means Indian mobile users should be the winners.

So what do customers think?

Delhi resident Shilpa Dhingra has been looking out for a phone that would work with Jio's 4G services.

She said cheap internet access was her key requirement.

"I use WhatsApp, Instagram, Snapchat, Facebook all day and cheap internet will definitely be welcome."

Many like her have been queuing at Reliance's stores in the capital, Delhi.

The SIM cards are free but they would need handsets that are 4G enabled.

IT professional Atul Mohan said he was a little wary.

"Just because we see advertisements we won't rush out to change our telecom operator," he said.

He added that he would wait to compare Jio's network quality with other operators before deciding to switch.

'Unfair practises'

Jio has already faced accusations of using unfair means during its testing phase.

The Cellular Operators Association of India (COAI), an organisation that represents Bharti Airtel, Vodafone, Idea and others, had protested last year, saying Jio was giving out full-fledged services to customers under the guise of testing.

Jio has denied these allegations.

Even after the launch, Mr Ambani has kept the pressure on his competitors - on Thursday, he highlighted that 50 million call failures were reported in the past week.

This is just the beginning of what many expect to be a long war of words.

India is a country where internet speeds are still slow and the problem of call drops is too frequent.

So it's not going to be an easy market even for Reliance.

While cheap deals will win it customers early on, only good service will guarantee it the long-term loyalty of users.