According to RCom, however, this is a usual entry strategy for someone coming into a crowded market.
"Our target is to reach the 100 million mark in mobile subscribers in the shortest possible time," says S P Shukla, president of RCom’s wireless business. Since the CDMA service already has 50 million and the older GSM service 10 million, the target gets whittled down to 40 million.
Still, what about the cost?
Entry cost
Retailers can pick up the SIM card for Rs 10 and sell it for Rs 25. The company will give them Rs 40 after a month if the subscriber is still on the network. Thus, even if the retailer gives the SIM free, he still makes money.
If a subscriber makes calls for 10 minutes or less a day, RCom will get no revenue for the first 90 days from him since it is giving 10 minutes free every day.
On the other hand, it will have to pay termination charges to other networks on the calls made to non-RCom phones at the government-mandated rate of 30 paise a minute.
Assuming that about two-thirds of the free outgoing calls are to other networks - after all, Reliance's GSM subscriber base is only a fraction of the total mobile user base of more than 300 million - the company will pay Rs 60 per subscriber per month to other networks for the free calls which anyway will not bring in any revenue.
Image: Reliance Webworld outlet. | Photograph, courtesy: Reliance Communications
Also read: Top 8 tech predictions for 2009
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