Reliance Communications has dropped a bomb in the telecom sector Reliance Jio 4G launch that offers free voice and super-cheap data rates, which has undeniably started a price war. Other major telcos operating in the country including the likes of Airtel, Idea, and Vodafone are expected to slash tariffs to compete with Reliance Jio. Reliance Industries chairman Mukesh Ambani yesterday announced free voice calling, with zero roaming charges and super-cheap data rates for Jio customers, where R-Jio will offer data services for free for four months. Telecom Industry experts now suggest that such a pricing strategy will disrupt the telecom market with low prices, compelling other players to announce tariff cuts in the coming weeks for the price sensitive Indian market.
Reliance Jio 4G launch hits Airtel, Idea, Reliance Hard
According to reports, Airtel, Idea, and Reliance lost a whopping Rs. 13,165 crores in market value after Reliance Industries chairman Mukesh Ambani announced the aggressively low prices of its Jio mobile services. This poses a major roadblock for other players in the telecom sector who are now in fear of losing their valuable customer base. And their apprehension is justified, as Reliance Jio’s pricing is estimated to be as low as one-tenth of the prevailing data rates.
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With plans as low as Rs. 50 per GB, free voice calls and roaming, Reliance has indeed sent shockwaves in the Indian telecom sector, which could potentially wipe out the existence of other players in the country. Mukesh Ambani-led Reliance Communications is aiming at signing up 100 million customers in the shortest possible time across the country.
While such aggressive pricing is certainly good news for consumers, but not for the telecom industry as a whole. According to Economic Times, the telecom industry is under Rs. 35,000 crore of debt and such aggressive tariff plans will further add to the misery. Eventually, crippling the recovery the industry has been going through.
A major cause of concern for analysts, who have been pondering over this ever since Reliance Industries announced its plans to enter the telecom sector with Jio. Telecom shares went down the drain. Idea Cellular ended at Rs. 83.70 down by 10.5 percent, and Reliance Communications fell 8.81 percent to Rs. 49.15. Bharti Airtel was the worst affected of the lot, witnessing a plunge of 6.37 percent to Rs. 310.