A glimpse of the impact and after-effects of Reliance Infocomm’s Monsoon Hungama offer, which whipped up a frenzy among users to avail of the cheapest handset and connection offer for an upfront cost of Rs 501.
July 2003: Dubbed as “the biggest gamble of all time”, Reliance India Mobile’s Monsoon Hungama certainly seems to be paying off. At least in terms of the storm of curiosity it is whipping up. The company’s retail webstores across the country are being mobbed by prospective customers, eager to make the most of an offer that seems too good to be true.
The offer: instant (limited) mobility for Rs 501. Included in this are a WLL connection and handset.
Of course, there is the fine print at the end. To begin with, the customer has to make a commitment of three years. To opt out before this period, either the handset has to be returned and charges paid or higher exit charges paid. If the handset is returned, the user has to pay Rs 3,000 plus a nominal depreciation charge. The exit charge to withdraw within one year is Rs 8,000, to withdraw in two years it is Rs 6,000, and in three years it is Rs 5,000.
As for the monthly bill, the minimum charge is Rs 449 for the Budget 149 plan. This includes a monthly rental of Rs 149 (which gives Rs 100 worth of talktime), Rs 100 as the monthly plan charge, and Rs 200 for club membership and club privilege. The Rs 200 amount is to be paid for 36 months irrespective of usage. “The benefits of club privilege are a 12-month warranty on the handset, a three-year insurance, and a 25 per cent discount at Reliance’s webstores,” explains a Reliance Infocomm spokesperson.
The calculations for the Budget 249 plan are similar. The minimum monthly payout is Rs 599, which includes free talktime worth Rs 150. The other charges are the same as those in Budget 149.
In both schemes, the subscriber has to pay for usage over and above the minimum talktime. The tariffs under both plans are Re 1 per minute for calls to Reliance and other WLL phones and Rs 1.99 per minute for calls to fixed line and cellular phones. Similarly, there are different rates for STD and ISD calls depending on the receiver’s phone connection.
At Rs 501 (entry cost plus a fully-provisioned phone), this scheme is, no doubt, one of the cheapest in the industry. (The Tatas offer a similar package for Rs 990, while GSM options are far more expensive.) However, effectively, at the end of the three-year period, the company recovers its handset cost through just the club membership charges of Rs 7,200 (Rs 200×36). In other words, the bill payable by a Monsoon Hungama subscriber may not be as cheap as it appears.
Telecom analyst Mahesh Uppal lends his perspective: “Consumers are happy at the moment with the services available so cheap, as the high price of handsets does hold back many potential customers. Still in the long run, the price war will take a toll on the quality of service doled out by the operator.”
Industry analysts feel that TRAI needs to take a closer look at Reliance’s tariff plans. Already the repeated tariff cuts have resulted in low ARPUs with subscribers talking more and paying less. Also, with none of the private telecom companies apart from Bharti breaking even yet, the viability of the smaller players is in question. Moreover, as rivals like BSNL join in, operators will try to push larger volumes through the same infrastructure.
In fact, pushing up volumes and creating a mass market by offering cheap handsets seem to have been Reliance’s main motivation. Within a week of the launch, the company issued a press note stating: “The overwhelming response to the scheme has led to a situation where we have to stagger deliveries of handsets.”
According to officials, 250,000 subscribers were added in just two days of the Monsoon Hungama launch. The company is currently scrutinising another 300,000 applications. This would take the total subscriber base from 1.6 million in June (as available with the Association of Basic Telecom Operators) to an announced 2 million subscribers.
In comparison, Tata Teleservices, which operates in five circles only, has 200,000 subscribers, as in June-end. Y.V.L. Pandit, TTSL’s chief operating officer, Mumbai, is not unduly perturbed. “Our focus is not just on numbers but also on the quality of service and the value we deliver through our services. Reliance, in that context, has not even begun to offer fixed line service.” The conflict between the two limited mobility players is evident and has been taken to the Telecom Regulatory Authority of India on several issues.
But, for Reliance, the numbers are important. As Akhil Gupta, joint managing director of Bharti Enterprises, points out: “It is better for all telecom service providers that Reliance gets its targeted subscriber numbers, as only then will the market stabilise.”
Reliance Infocomm commercially launched its service in May 2003. Its ambitious target was to get six million subscribers in the first month of operations. Three months into the market dispelled those ambitions. The response was at best lukewarm; there were several marketing, operational and administrative miscalculations; and the company had to eventually rework some of its strategies.
Since then, it has bounced back to health aided by aggressive marketing and rock-bottom prices. Industry analysts and Reliance’s cellular rivals are, however, questioning whether this predatory move is a desperate measure to drum up volumes and also thereby influence TDSAT’s final ruling on limited mobility, which is expected soon.
For Reliance, the only conviction right now is the growing numbers at its sales outlets. The monsoon magic seems to be working, and Reliance intends to make the spell last.
