India’s Richest Man Readies a $16 Billion Telecom Assault

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Mukesh Ambani
Reliance Industries Ltd. Chairman Mukesh Ambani. Photographer: Pankaj Nangia/Bloomberg

India’s top wireless operators Bharti Airtel Ltd., Vodafone Group Plc and Idea Cellular Ltd. are girding to defend market share as Mukesh Ambani, the nation’s richest man, finalizes his foray into an already crowded market.

Ambani’s $16 billion Reliance Jio Infocomm Ltd. service may offer 300-rupee ($5) monthly tariffs and compatible smartphones for less than 4,000 rupees. The fourth-generation network is due to start commercial operations around December with speeds faster than most existing Indian connections.

“It’s a smart strategy to make sure the devices are within reach of the common consumer,” said Rishi Tejpal, an analyst at Gartner Inc. in New Delhi. “This whole race could depend on who has the best portfolio of devices.”

If Ambani delivers on his promise of affordable and speedy services, he could hurt revenues at Bharti, Vodafone’s India unit and Idea, Jefferies Group wrote in a report.

Bharti, India’s largest wireless provider, says it’s offering 4G in more than 30 Indian cities. The company has tied up with Xiaomi Corp. and Samsung Electronics Co. to sell compatible smartphones with discounted data service packages.

Vodafone expects to roll out 4G coverage in some areas by the end of 2015, Sunil Sood, chief executive officer of the Indian unit, told reporters May 19. Idea plans to offer the faster service in some regions when 4G phone prices drop, Managing Director Himanshu Kapania told Bloomberg TV India.

Bharti climbed 1.1 percent to close at 424.45 rupees in Mumbai, extending the stock’s advance in the past 12 months to about 26 percent. Idea gained 1.6 percent. Reliance Industries Ltd., the parent of Reliance Jio, rose 0.6 percent.

The following charts show how the entry of a well-financed operator may disrupt India’s unique wireless industry.

CHART 1: In India, a disproportionately high number of wireless providers compete for subscribers. This keeps call rates low and airwaves expensive, according to Jefferies.

CHART 2: India’s top phone companies spent heavily to secure spectrum, curbing their scope to invest in new technology.

CHART 3: The opportunity in India comes from volume. It’s the second-largest wireless market, providing services to more than 900,000 subscribers -- a number that continues to grow.

CHART 4: Reliance Jio could drive down data prices. Sanford C. Bernstein predicts it’ll generate 10 billion rupees net income by 2025.

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