MUMBAI Reliance Industries Ltd (RELI.NS) will start offering fourth-generation (4G) telecommunications services next year, its chairman and India's richest man, Mukesh Ambani, said on Wednesday, a move that will intensify competition in an already crowded market.
Reliance, India's third-most valuable company, gets most of its revenue from its sprawling energy empire. It has expanded into new businesses like retail, telecommunications and media in recent years as growth in its core energy business slows.
Reliance made a return to telecoms in 2010 by acquiring the only company that had won nationwide 4G airwaves in a government auction, but has yet to start services as it builds the business on an unproven and still-developing technology.
On Wednesday, Ambani told shareholders that Reliance was planning an investment of 700 billion rupees ($11.7 billion) in the telecoms business, Reliance Jio, and would launch services in phases across India in 2015.
Reliance's entry into the telecoms sector poses a threat to rivals like Bharti Airtel Ltd (BRTI.NS), Vodafone Group Plc (VOD.L) and Idea Cellular Ltd (IDEA.NS), which in recent quarters managed to raise voice call prices after a years-long price war.
"Once (Reliance) Jio comes, voice charges will get disrupted because they typically bring in cheaper rates," said Naveen Kulkarni, a telecoms analyst at PhillipCapital.
Kulkarni, however, said Reliance's planned launch in 2015 gives "some cushion" to the existing telecom carriers. Some in the industry had expected Reliance to start services this year.
Reliance aims to offer high-speed data as well as voice services and added more airwaves from an auction this year.
"The objective is to ensure that everything that we offer is future-proof and world-class," Ambani told Reliance's annual shareholder meeting. "Limited field trials with our initial set of services for the broad band services are already underway."
Cash-rich Reliance plans to invest more than 1.8 trillion rupees ($30 billion) over a three-year period that ends in March 2016 across all its businesses, Ambani said. Last year, the company had announced plans to invest 1.5 trillion rupees over three years.
Reliance expects to double its retail business's sales every three to four years, said Ambani, whose wife Nita won shareholder approval on Wednesday to join the company's board.
The unit, the largest retailer by revenue in India's $500 billion retail sector, posted its first annual profit since its beginning in 2006 in the fiscal year ending March 31.
ENERGY INCOME FALLING
Reliance's move into telecoms are meant to cushion a decline in oil and gas revenue that has been hit by the falling output from its key gas block off India's east coast.
Reliance and its partners in the KG-D6 gas block - BP Plc (BP.L) and Niko Resources (NKO.TO) - are also locked in a dispute with the federal government over the implementation of higher gas prices.
Ambani said on Wednesday timely regulatory approvals and "market-based gas prices" were key to developing the resources.
The government in June last year approved a formula, linking prices of locally produced gas with global benchmarks, that could have nearly doubled gas prices from the current $4.20 per mmBtu from April 1.
That price increase was ordered to be deferred by the election regulator ahead of a general election and the new government that took power last month has yet to decide on the increase.
Reliance shares extended their fall after the shareholders' meeting and ended down 2.1 percent. Some traders said investors were disappointed by the absence of a plan to resolve the gas price dispute in Ambani's speech.
(Additional reporting by Nivedita Bhattacharjee and Abhishek Vishnoi; Writing by Devidutta Tripathy; Editing by Matt Driskill and Louise Heavens)