Mukesh Ambani has a four-letter strategy to win India’s telecom wars—free

Quartz/ Ananya Bhattacharya

Jio-Reliance-Mukesh-Ambani
Mukesh Ambani, India’s richest man, is pulling out all the stops to make his telecom venture fly.

On July 21, Ambani announced that Reliance Jio will offer free 4G-enabled phones to its subscribers—although buyers will put down a “fully refundable” one-time security deposit of Rs1,500 ($23.32).

“…there are more than 50 crore (500 million) feature phone users who have been left out of the digital revolution,” Ambani said at Reliance Industries’ annual general meeting in Mumbai, where he launched the JioPhone. “This digital disempowerment and unfairness must end. Jio is committing to end it today.” In effect, apart from giving telecom companies a run for their money, Reliance Jio is also set to disrupt India’s smartphone market.

Launched last September, Reliance Jio already offers free voice calling, as well as the world’s cheapest internet data plan, starting at Rs49 ($0.76) per gigabyte (GB). On the JioPhone, voice calling will “always” be free and unlimited data will cost only Rs153 ($2.38) per month, Ambani said.

Its free schemes and recharge options have expanded Jio’s user base rapidly. Some 66% of Reliance Jio customers were using the service as their primary connection by March, up from 50% in December. The company claims that mobile data usage in India fared around 0.2 billion GB per month in the pre-Jio era. After Reliance Jio’s entry, overall data consumption supposedly skyrocketed to 1.2 billion GB per month, of which 1 billion is consumed by Jio subscribers. The service provider now has over 125 million customers, Ambani said.

However, with only 300 million smartphone users in the country, the growth could soon hit a wall—hence, the JioPhone, a 4G-enabled feature phone with a large screen and access to apps.

Reliance is sourcing its phones from multiple vendors, including some Chinese companies and New Delhi-based Intex Technologies. “We will launch this 4G feature phone in this quarter, but will not be selling it standalone in the market. We are in dialogue with Reliance Jio for bundling which should be through very soon,” Nidhi Markanday, director and business head, Intex Technologies, had told the Economic Times on July 19. “The pricing will be decided by Jio as it will be on the subsidised system only.” Initially, reports suggested that the phone would be priced at Rs500 ($7.72) but Ambani evidently had other plans.

Following Ambani’s announcement, shares of leading Indian telecom companies plunged on the BSE. Bharti Airtel’s stock was down by 3%, while that of Idea Cellular dropped by as much as 5.48% as of 12.30pm.

“An extremely cheap handset is a serious game-changer,” Mahesh Uppal, a New Delhi-based telecom expert, told Quartz. “It is a significant move that reflects a correct understanding that broadband access in India will require serious work on the affordability front.” While a low price (or no cost, in this case) is a huge incentive, “there are other factors that affect buying decisions such as-access to network, ability to use internet, service etc,” Uppal added.

Also, there are questions over the fine print of the JioPhone scheme. According to Ambani, users will have to wait three whole years till they get their money back. That’s a long period of time to go without upgrading a phone. And what happens if the device is damaged, broken, or rendered obsolete before the 36 months are up?

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