Indian tycoon Mukesh Ambani hopes his multi-billion dollar bet on cheap high-speed wireless broadband could change the way nearly a billion of his countrymen use mobile devices from the way they do banking to watching cricket. In a country where most people own a mobile phone yet lack basic Internet access, it is a risky gamble even for India's richest man. He is counting on an unproven strategy and still-developing technology in a market with very little pricing power.
Three years ago energy conglomerate Reliance Industries Ltd (RIL) won an exclusive nation-wide licence to roll out 4G across India, giving it a foothold to tap a potentially lucrative market in phones, tablets, computers and television. The data-focused service could start to roll-out in New Delhi and Mumbai by the end of the year, sources familiar with the matter, who asked not be named, told Reuters. Eventually, the plan is to run it across hundreds of cities. Ambani has refused to divulge any specifics on the launch.
In what is one of the world's poorest countries, Ambani's 4G mantra is affordability. This has fuelled industry worries of a price war in a still-crowded telecoms sector that has recently started seeing stability after years of cut-throat competition and regulatory uncertainty. Ambani's strategy is cut-price handsets and data, even if it means he has to subsidise the devices from his own cash pile. Fortunately, he has very deep pockets. Reliance's cash hoard of $15 billion stands in contrast to rival telecoms carriers who are estimated to have a combined debt load of $32 billion.
"Broadband and digital services will no longer be a luxury item - a scarce commodity - to be rationed amongst the privileged few," Ambani, the world's 22nd richest person according to Forbes magazine, told shareholders this month. Ambani hopes to offer 4G devices costing less than 5,000 rupees ($90) and in talks with Samsung Electronics Co and others for sourcing handsets and other devices, one of the sources said.
A spokeswoman at Samsung's local unit declined to comment. While it appears to be a risky bet, the payoff for a successful venture is first-mover advantage in mobile data communications, which has transformed media, marketing and business strategies from Europe and the United States to China.
In a sign that its rollout is gaining pace, Ambani's Reliance Jio Infocomm unit this month signed a $2 billion telecom tower sharing deal with mobile carrier Reliance Communications, which is owned by his younger brother Anil. That followed an agreement with rival Bharti Airtel for leasing international bandwidth, and two other pacts. India's cellular market is the world's second largest by users after China, with users surging from just over 5 million in 2002 to nearly 870 million now. However, less than 5 percent of mobile phone owners use their device for high speed 3G data.
The uptake for 3G has been slower than expected since its launch in 2011 after costly airwave auctions, mainly due to the premium pricing of data services in a country where voice rates are less than 1 US cent a minute, among the lowest anywhere. Cheap data rates could help grow usage of 4G, which offers several times faster download speeds, but would force Ambani to play an expensive mass volume game - a bruising strategy that has battered margins for India's incumbent mobile carriers. Over the next five years as infrastructure is built, analysts predict India's rapidly growing middle class will buy between 30-80 million 4G connections. Some investors, however, are worried Reliance may be taking too much of a gamble in its bid to diversify away from its oil and gas-related business which produces the bulk of its $70 billion in revenues.
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