Reliance Infocomm Ltd, which is building a $5 billion nationwide fibre-optic network, will on Friday launch its limited radius mobility service which analysts say will intensify a tariff war and expand the market.

A unit of the Reliance Group, the country's largest private industrial house, it has said it will offer the cheapest fixed-line and limited mobility services, covering over 90 per cent of India's billion-plus people by mid-2003.

"The service will change the dynamics of the sector," a telecom analyst working at a Mumbai brokerage, said.

Reliance's entry will force cellular firms to reduce their call charges, already the lowest in the world, to retain existing users, she said.

"I see Reliance getting at least 4.0 million subscribers in the first year and about 5.0-to-7.0 per cent share of the subscriber base."

India, billed as one of the fastest growing telecom markets globally in this decade, has more than 10 million mobile phone users while limited mobility services users have crossed half a million. There are close to 40 million wireline customers.

Mumbai-based Reliance Infocomm will begin providing services in Gujarat that embrace mobile, local, domestic long distance and overseas calls.

The firm, 45 per cent owned by petrochemicals and refining giant Reliance Industries Ltd, will offer services spanning telephone, Internet and entertainment through its 60,000-km optic fibre network linking 600 locales.

It uses US-based Qualcomm Inc's code division multiple access 2000 1X which offers better voice quality and higher data speeds compared with existing cellular networks which work on the rival GSM platform, analysts say.

India's cellular call rates are at an average of about a rupee a minute compared with Rs 0.40 per minute for outgoing calls on wireless in local loop services within city limits, which have free incoming calls.

Reliance's services will compete with a clutch of players including the largest cellular services provider Bharti Tele-Ventures Ltd and state-run Mahanagar Telephone Nigam Ltd.

"I expect the telecom unit to post a net profit in the third year of operations," said Pushpinder Singh, analyst at Refco-Sify Securities.

Kobita Desai, senior telecom analyst at Gartner India, said the services would impact both cellular firms and basic operators.

"Cellular operators will automatically see pressure on tariffs especially on the pre-paid segment, which is more than half the subscriber base," she said, adding that fixed-line users with multiple connections are likely to opt for a swap.

"They would like to surrender and derive benefits of mobility," Desai said.

Reliance's services will also push up the tele-density which stands at just four phones per 100 people against a global average of 15.

"It took almost three years for tele-density to increase from three to four," said a Mumbai-based analyst. "Reliance's services and the subsequent reduction in tariffs will result in tele-density improving to 4.5 in a much shorter interval."

Reliance shares were up nearly 3 per cent at Rs 300 in the afternoon at the Bombay Stock Exchange, outpacing the one per cent gain on the main index.