Reliance Industries (RIL) on Friday unveiled a 4G-enabled feature phone that comes at an ‘effective’ price of zero. At the 40th annual general meeting (AGM) of the company, the chairman, Mukesh Ambani, also announced a 1:1 bonus issue of shares.
RIL’s shares rose 3.76% to end the day at ₹1,586.2 on the BSE. Stocks of telecom rivals such as Bharti Airtel and Idea Cellular declined 2% and 3.11% respectively.
Buyers of the new phone will have to pay a deposit of ₹1,500 and after three years, if the user chooses to return the phone, the money would be refunded.
With an eye on becoming India’s largest mobile service provider, the company aims to bring into its fold 50 crore Indians who are unable to afford smartphones.
Named the JioPhone, the product will offer voice services free. “On the JioPhone, voice will always be free,” said Mukesh Ambani, chairman, RIL. “Currently, 50 crore feature phone users are charged ₹1.2 to ₹1.5 per minute for basic voice calling. They end up spending their entire month’s telecom budget of ₹150-₹200 only to get 150 minutes of basic voice. With Jio’s network coverage reaching 99% of India’s population, and by making voice calls free, this potentially empowers each and every Indian to make free voice calls to any operator, anywhere in India.”
‘Unlimited data’
Citing India’s mobile data usage having crossed the U.S.’ and China’s, Mr. Ambani said Jio will give users access to unlimited data on the JioPhone, he said. “If these feature phone users were to consume a similar quantity of data on another operator’s network, they would spend over ₹4,000-₹5,000 per month at prevailing 2G data rates. Jio will provide this at only ₹153 per month, that is, [at] one-thirtieth the price.” There would be a fair usage policy of half a GB per day, to ensure that bandwidth is fairly apportioned for every user, he added.
Jio currently has 125 million users on its network.
The new phone will be available for user testing from August 15 and for pre-booking from August 24. The phone will be physically available to those who have pre-booked on a first-come, first-served basis from September. From October, the company plans to manufacture all JioPhones in India, promising five million phones every week.
In a 10-minute, surprise board meeting convened during the AGM, even as shareholders watched a corporate film on Reliance, the company decided to issue bonus shares in a 1:1 ratio.
“RIL, at its board meeting held on July 21, 2017, has, subject to approval of members of the Company through postal ballot, recommended issue of bonus shares to the members of the company by capitalisation of its reserves in the ratio of 1 (one) bonus equity share of ₹10/- each fully paid-up for every 1 (one) existing equity share of ₹10/- each fully paid-up (that is in the ratio of 1:1) held by the members as on a ‘record date’ to be fixed hereafter for the purpose,” said a company statement. Member approval will also be sought through postal ballot for increase in authorised share capital, the statement said.
Eyes top-50 slot
“Reliance at 50 will aspire to become... one among the top 50 companies in the world,” he said. “Reliance’s future value-creation strategy will support tens of thousands of small and medium businesses.
“Over the next decade, India has the potential to move from a $2.25 trillion economy to a $6 trillion economy I am confident that Reliance’s own growth over the next ten years and our contribution to the Indian economy will surpass what it has achieved in the past 40 years,” Mr. Ambani said.
“[The] ₹153 plan compares to the current industry ARPU of ₹120-130 — we estimate feature phone users ARPU to be below ₹100,” Navin Killa, analyst with UBS Securities, wrote in a note.
Citing Mr. Ambani’s reference to a JioPhone TV cable that connects the phone with any TV for purposes of viewing mobile content on a large screen, Nitasha Shankar, senior VP and head of research, YES Securities, said, “The [cable TV] industry had seen topline and bottomline come under pressure due to on-the-ground issues related to the rollout of digitisation... During such times, if Reliance were to launch the Phone-TV, it could lead to disruption on the pricing side.”
