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Is Reliance’s high 4G tariff a tactical move aimed at competitors?

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A report by Economic Times suggests that Reliance Communications, owned by Anil Ambani, will start offering 4G services to new and existing GSM users from August, in turn suggesting that its network partner Jio too could enter commercial launch at the same time.

At present, RCom is offering 4G services only to those users who used to be on its CDMA network and neither its GSM users nor new subscribers can access them. Moreover, its initial 4G prices for CDMA upgraders have surprised both customers and competitors, with packs and plans making it the most expensive 4G provider in India.

At least some in the industry believe that RCom is likely to unveil its real tariff plans only at the time of full launch in August for strategic and competitive reasons.

JIO LAUNCH IN AUGUST?

With the ET report suggesting the company will kick off its 4G services (as distinct from CDMA upgrades) in August, the likelihood of a full-scale commercial launch by Reliance Jio around the same time has also become stronger.

Both Jio and RCom are expected to launch their commercial 4G services at the same time as they both rely on the same radio network.

Jio’s launch is highly anticipated by consumers and its rivals as the company is expected to offer 10 GB of 4G data for Rs 500.

In comparison, RCom’s tariff for upgrade customers pitches 2 GB of data for Rs 450-500. This is similar to or more expensive than what competitors like Bharti Airtel and Idea Cellular currently offer.

RCom uploaded its 4G tariffs on its website as its CDMA upgrade customers have started receiving 4G signals. These tariff plans suggest RCom will charge 2-3 times more for data from customers after their upgrade compared to before it.

For example, before the upgrade, most CDMA mobile customers could get 4 GB of EVDO data at Rs 250. After the upgrade, they will get less data (3 GB) for Rs 650. For Rs 250, the upgraded customers get only 1 GB.

Some in the industry believe that RCom will reveal a new, cheaper set of tariffs when it does full commercial launch in sync with Jio.

Unveiling the real tariff two months ahead of full commercial launch could have given rivals a chance to tweak their own pricing strategies in advance, denying the surprise element from RCom and Jio’s commercial launch.

Adding weight to this assumption are reports that RCom has assured its most lucrative postpaid customers that they will continue to get at least 25 GB of high-speed data, irrespective of tariff plans. There are also reports that the company is offering to maintain pre-upgrade tariffs for these subscribers, suggesting that a new set of long-term tariff will be announced in two months or so.

Cheaper pricing based on higher efficiency is the key selling point of Reliance Jio’s upcoming telecom service.

According to the Economic Times report, RCom has so far received go-ahead from the Department of Telecom for its network tie-up with Reliance Jio only in nine circles.

This would explain why Reliance has not been able to move its CDMA upgrade customers to a 4G network even two months after it started the migration process.

So far, CDMA-upgrade users in select circles like Delhi and Uttar Pradesh have reporting being able to use 4G on their new Reliance SIM.

The report also said that RCom has applied for permission to implement its sharing deal with Jio in eight more circles, and that the permission to do so is expected in another 7-10 days. We believe these new circles will include the three southern zones of Kerala, Tamil Nadu and Karnataka.

According to a poll that we conducted, users are able to get 4G signals on their upgrade SIMs in several states, including Delhi, Mumbai, Kolkata, Maharashtra, Gujarat, Andhra Pradesh and Uttar Pradesh.
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