India’s richest man, Mukesh Ambani entered the mobile phones industry with a carrier offering a lot of free services. Reliance Industries has made another attempt to crush their rivals by launching a very cheap feature phone which provides access to unlimited data.
The wireless subsidiary of Reliance Industries, Reliance Jio Infocomm Ltd. has revealed a phone costing mere 1,500 rupees ($23) which will be released on August 15. The JioPhone will come with a tariff plan costing as low as 23 rupees a day, or 153 rupees (~$2.38) a month. The phone was launched nearly 10 months ago, and has already managed to snag 125 million customers.
Reliance is very new in the carrier market, thus users prefer sticking to the old networks like Bharti Airtel and Idea Cellular. The new JioPhone is offering unlimited data and voice for as low as $2.38 ; it is making the network much more accessible to feature phone users; 500 million approximately. As soon as the announcement for the unlimited data packages was made, the competitors like Bharti Airtel Ltd., which is the largest mobile phone operator in the country, had its shares plunge by 2 percent. Idea Cellular, that just became the number one carrier by merging with Vodafone, also saw a drop in shares by 3.3 percent.
The plot below shows how Bharti and Idea’s shares dropped with the launch of Jio Phone.
The JioPhone unit is effectively free of cost, but a person getting the JioPhone will have to make a security deposit of 1,500 rupees ($23) which is refundable after three years. The free phone asks for only one thing, customers must stick to Reliance Communications service provider. The amount may sound insignificant, but if the company manages to bag 250 million customers, the security deposit alone could earn it $460 million in interest every year. Therefore, the phones that company is technically offering for free won’t even dent the company slightly.