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Reliance Info to unleash tariff war

George Smith Alexander & Savio G Pinto in Mumbai

You knew it would be cheap. But it now appears that Reliance Infocomm is set to trigger a new rate war in the telecommunications industry with its aggressive pricing for its limited mobility services, scheduled to be launched at the end of December.

According to company sources, Reliance will be charging customers Rs 15,000 for local calls, inclusive of rentals and the code division multiple access handset, for a three-year period. This will, however, not include STD and ISD calls.

And you may not have to shell out much yourself, because Reliance is working out a financing scheme with a slew of banks.

A Reliance Infocomm spokesperson declined to comment on the issue. The company is understood to have told the banks that it is looking at establishing a customer base of 1 million in the first three months of operations, and around 4 million in the first two years.

According to sources, the company has also initiated talks with some of the top public, private and foreign banks, including the State Bank of India, Standard Chartered Bank, Citibank, HDFC Bank and ICICI Bank, for working out financing for consumers.

The financing scheme will cover both the cost of the handset (around Rs 5,000) as well as the rentals and bills for local calls, and is expected to be at a rate of interest in the region of 11 per cent.

However, this has not been finalised because of variations in the interest rates offered by different banks, and the method of charging interest.

"Banks were offering different interest rates, but Reliance wants the same interest rate for all banks, because it wants some level of uniformity. However, the risk perception of each bank can be different. While some of the banks will have the capability of financing around 100,000 users, others will be looking at different targets," a source added. The credit risk in the case of default will also be borne by the banks.

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