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Airtel, Idea may have to change business model due to Reliance Jio

The launch of Reliance Jio will force big telecos Bharati Airtel and Idea Cellular to bring about major changes in their business model, according to experts.

Mayuresh Ganapatye        Last Updated: September 2, 2016  | 12:14 IST
Airtel, Idea may have to change business model due to Reliance Jio
Photo: Reuters

The launch of Reliance Jio will force big telecos Bharati Airtel and Idea Cellular to bring about major changes in their business model, according to experts.

Reliance Industries (RIL) Chairman Mukesh Ambani announced the launch offer of Reliance Jio today at the company's 42nd annual general meeting.

ALSO READ: Reliance Jio tariffs: Everything you need to know

He announced free voice, zero roaming charges, and Rs 50 for a one-GB data plan as some of the top features of Reliance Jio.

"Jio will never charge for voice calls across India and messages," Ambani said while addressing RIL's annual general meeting in Mumbai.

Since 70 per cent of the revenues of incumbents in telecom come from voice calls, the free voice move is likely to be a cause of big concern for Jio's competitors.

Today, stocks of these telecos fell by 8 % to 9%  after Ambani unleashed the speed and data war. Airtel, India's largest operator with more than 230 million subscribers, saw its stock fall to Rs 302 at around 12 PM after the announcement.

With the shockwaves already visible, experts believe that telecos are likely to make changes in the way they operate due to the arrival of Reliance Jio.

"Other telcos will be forced to change their business model, revenue model and the network in use," said Prayesh Jain, AVP Research IIFL.

But doubts remain as to how Reliance will be able to sustain such aggressive rates.

"It would be interesting to see that how Jio is going to recover its investment after quoting such aggressive rates. Market is quite eager to see this,"  Jain added.

Meanwhile, Reliance Industries (RIL) shares went down 2.85% to Rs 1029.8. Interestingly, Network18, a Reliance company, also saw its share price fall by 3.59% to Rs 44.35.

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