India’s Reliance Industries, the petrochemicals conglomerate which also has interests in the country’s burgeoning telecoms sector, is poised to cause a furore in the mobile market, after its low-cost CDMA-based wireless in the local loop (WiLL) system won regulatory approval from the courts. Reliance, which runs the service through its Reliance Infocomm unit, said last month that it had signed up 3.1 million customers to the so-called ‘poor person’s cell phone’ since launching operations less than a year ago. However, the August ruling from the courts has now legitimised Reliance’s place in the county’s mobile sector and is likely to be the catalyst for an even more dramatic surge in its popularity. To the chagrin of GSM operators which were forced to pay high fees for cellular spectrum licences, Reliance is pursuing a simple business plan of keeping prices low in the hope that volume sales will follow. According to the Financial Times, the company’s rapid growth is based on offering a handset with a one-off payment of INR501 (USD11), followed by monthly payments of INR200 for a three-year contract totalling INR7,200 with call charges separate. Reliance’s price plan is significantly less costly than its closest rival Tata Teleservices which offers a handset for INR999 and will appeal to many less advantaged Indians in a country where annual incomes are low. Indeed, the new scheme is reportedly already proving popular, attracting over a million sign-ups in the first ten days. Rival GSM operators have complained however that Reliance pressurised the courts ahead of the ruling by publicly proclaiming its one million new subscribers, while consumer groups are concerned that the newcomer’s contracts are restrictive and unfair in a country where 40% of the population is illiterate.
In a related story, US-based Qualcomm is said to have abandoned plans to invest USD200 million in Reliance Infocomm, a move which would have given the American firm a 4% stake in the operator. Despite the two heralding plans for the proposed investment in January last year, Reliance now says that as ‘we are not starved of capital…the investment will not take place’. The likelihood of Qualcomm ploughing money into the venture has been questioned already. Less than six months after announcing the deal Qualcomm distanced itself as a result of what it called Relaince’s inability to achieve agreed targets.