Mukesh Ambani, chairman of Reliance Jio will make a ‘significant announcement’ about the 4G wireless service provider’s offerings at 11 AM on Friday while delivering his annual speech at its parent’s annual general meeting.
A live webcast of Mukesh Ambani’s speech at the AGM, at which he is expected to announce the launch of ultra-cheap feature-phones, can be seen using the link given below.
The company has not revealed what the ‘significant announcement’ is, but it’s almost certain to be the unveiling of the company’s big thrust into India’s lucrative voice market.
At present, about 66% of the total money paid by telecom consumers in India is for voice services, and data charges account for only about 25% of the market.
In the data market, Reliance Jio has already captured about 50% of the market by revenue in less than a year of launch. By traffic, its share is estimated at about 75%.
However, in the voice market, the company has not been able to notch up the same kind of market share for handset-related reasons.
It is estimated that less than 10% of the money consumers spend for wireless voice services end up with Reliance Jio, even though its offerings are far cheaper than those of its competitors.
While competitors like Bharti Airtel and Vodafone charge Rs 350 rupees per month for unlimited calls, the new operator charges only about Rs 150.
Despite this, the company has not been able to make the same impact in this market as it has been in the data segment.
The primary reason is that its voice services work only on smartphones, and that too on the minority of smartphonesin use today that come with 4G support.
There are three factors that prevent people from going for 4G smartphones for voice purposes.
First, they cost at least Rs 3,500, while voice-oriented 2G phones can be purchased for less than Rs 1,000.
Secondly, they are fragile, and break easily on fall, while 2G featurephones are rugged and do not get destroyed in case of a fall.
Third, smartphones are relatively more difficult to use and many people find them intimidating.
They also require bigger batteries to support their higher power consumption.
At tomorrow’s AGM speech, Mukesh Ambani is expected to unveil new feature phones that resolve the above problems.
These phones are reportedly going be based on chipsets manufactured by semiconductor maker Spreadtrum, and will be sold via partners like Intex.
The price of these dual-SIM featurephones will be in the Rs 1,000-1,500 range. However, in return for shelling out that amount, users are likely to get free usage for 6 months to one year.
The strategy is similar to what it adopted for selling its LYF branded smartphones.
PAIN FOR RIVALS
The move into cheap voice services is likely to further accentuate the pain for Jio’s rivals such as Bharti Airtel, Idea Cellular and Vodafone.
These companies get about 80% of their profits from voice services, and currently charge about 30 paise per minute for voice calls and generate voice revenue of around Rs 150 per subscriber per month on average.
With the new offering from Reliance, the incumbents would be forced to reduce their 350-per-month tariff to Rs 250 or even Rs 200. This would effectively half their operating profit and could push them into losses for several quarters.
To emerge out of these losses, they would have to depend on increasing their revenue from data services.
However, many of the telecom towers of the incumbents are not connected with high-speed backhaul cables, and cannot carry the kind of data required to compete with Jio. A single 4G tower could generate hundreds of Mbps of traffic.
According to the Ambani-led firm, only around 20% of the towers of the incumbents are connected with fiber, while 60% of Jio’s towers are fiberized and it would take the rivals years to catch up.
It is during this gap that the newcomer intends to emerge as a dominant player in both traffic and revenue.
On the other hand, the rivals too have started investing heavily into fiber, and looking at alliances to bridge the gap.
While Vodafone and Idea Cellular have decided to merge, Bharti Airtel is reportedly in talks with the Tata Group, which owns one of the biggest fiber networks in India, for a tie-up or merger.