Billionaire Ambani's New $23 Phone Slams Rivals' Stocks

(Bloomberg) -- The Indian tycoon who punched his way into the country’s mobile phone industry by starting a carrier with free services took another swing at rivals, unveiling a cheap feature phone with access to unlimited data. Competitors’ shares plunged.

The wireless unit of billionaire Mukesh Ambani’s retail-to-refining conglomerate will offer a data-enabled feature phone for 1,500 rupees ($23) starting Aug. 15, he told shareholders in Mumbai on Friday. The Reliance Jio Infocomm Ltd. handset, or JioPhone, will come with tariff plans as low as 23 rupees for two days or 153 rupees monthly.

Bharti Airtel Ltd., India’s largest operator, closed 2 percent lower in Mumbai. Idea Cellular Ltd., which has agreed to merge with Vodafone Group Plc’s local unit to create the No. 1 carrier, sank 3.3 percent. Bharti Airtel and Idea didn’t immediately respond to email seeking comments. Reliance’s shares advanced 3.7 percent, outstripping the 0.4 percent rise in the S&P BSE Sensex.

“Voice will always be free on the JioPhone,” Ambani said at a shareholders’ meeting in Mumbai. “Jio will give users access to unlimited data on the JioPhone.” The data access will start Aug. 15, he said.

The move by Ambani, India’s richest person, opens a new front in a price war that is already prompting consolidation within a debt-strapped industry that includes 11 carriers. Rivals have cried foul against Jio’s tactics and have blamed widening losses on the new entrant.

War of Words

Jio’s business practices will allow the upstart “to use its muscle power and price its services in a predatory manner to kill the rest of the industry and create a monopoly,” Bharti Airtel said in a July 20 statement.

Vodafone Chief Executive Officer Vittorio Colao, in a Friday call with reporters, shot back at Reliance Jio’s claims that established companies in the Indian telecommunications industry have made over $15 billion from inflating prices and lax regulation. Colao called these claims “fiction” and argued that the companies had to build out networks to bring coverage to rural areas.

Reliance will tie up with Taiwan’s Foxconn Technology Co. to manufacture the JioPhone and may also consider working with with Wistron Corp., a company official said on Friday, asking not to be identified as the information is private.

The phone is “effectively free,” said Ambani, because the initial 1,500 rupee payment can be refunded after three years if the phone is returned.

(An earlier version of the story was corrected to show an Idea-Vodafone merger would create a market leader.)

--With assistance from Saket Sundria and Rebecca Penty

To contact the reporter on this story: Bhuma Shrivastava in Mumbai at bshrivastav1@bloomberg.net.

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Dave McCombs, Shikhar Balwani