Ambani’s 45-minute speech at the commercial launch of Reliance Jio has cost Airtel and Ideal Cellular a whopping Rs 11,983 crores. As Reliance Jio announced tariffs never before heard of in Indian telecom industry, shares of Bharti Airtel, Ideal Cellular, and Reliance Communications nosedived up to 9 percent on Thursday last week, reports Economic Times.
Reliance announced that it would offer free voice calls as part of Reliance Jio SIM tariff plans. Although the “free” aspect of voice calls is still open to interpretation, it has had the desired effect in the telecom space, with Airtel and Idea Cellular already slashing prices. On Thursday, shares of Bharti Airtel dropped 6.37% to settle at Rs 310.70 on BSE, while Idea Cellular shares dropped 10.48% to settle at Rs 83.70. Ambani’s 45-minute speech wiped out Rs 12,000 crores in market capitalization for Bharti Airtel. Idea Cellular lost about Rs 2,800 crore in market value. At close, the combined losses stood at Rs 11,983 crore. Reliance Communications stocks too plunged to Rs 50.40, a drop of 6.49%. The three major players – Airtel, Idea Cellular and Reliance – together lost about Rs 13,166 crore in market capitalization that day.
The plans and tariffs being offered by Reliance Communications are being seen as “disruptive” and will probably shift the dynamics of the Indian telecom industry to a significant extent. The shift in dynamics will begin with slashing of tariffs by Airtel, Vodafone and Idea Cellular. In fact, the slash in prices has already been announced by Jio’s competitors. Speaking about the tariffs, Ambani said –
“All voice calls for Jio customers will be absolutely free. Roaming charges will be zero. In addition, Jio will offer data at Rs 50 per GB (base rate) against current rate of Rs 250/GB charged by peers. Jio will launch 10 plans. We have price points starting from Rs 19 for the occasional data user, to a monthly rate of Rs 149 plan for the light data user and all the way up to a monthly Rs 4,999 plan for the heaviest data user.”
INR 1,50,000 Crores has been invested in the Reliance Jio Infocomm venture, which makes it the world’s biggest startup. Reliance Jio has set itself ambitious goals of covering up to 90 percent of India’s population by March 2017. Towards this, the company intends to launch 4G handsets at prices as low as INR 2999. The subscriber base has already reached 25 million and is growing at a staggering rate.
The slash in prices is good for the end-users. But the telecom industry now sits on about INR 35,000 crores debt. So the price slashes aren’t exactly good for the telecom industry. It remains to be seen how the Indian telecom space adapts itself to the changing landscape.