A decade ago, Indian conglomerate Reliance Industries Ltd. offered mobile phone subscribers a sweetheart deal: a free digital mobile phone, unlimited free incoming calls and billing at a 15-second pulse rate at a throwaway price similar to that of a postcard. The plan worked: Reliance added 1 million subscribers in 10 days and ushered in a new era in the Indian telecom space.
Today, history is repeating itself. Reliance is currently pitching in billions of dollars to kickstart its 4G go-to market strategy. South Korea's Samsung Electronics reportedly signed a deal with Reliance's telecom arm, Reliance Jio, to launch a 4G handset priced at about 6,000 Indian rupees, equivalent to roughly $100. The handset will run Reliance's TD-LTE-based voice and high-speed Internet services with entry level data packages likely to start at $1.50 (Rs 100) per month.
According to IHS, the Samsung handset is highly likely to debut as the cheapest 4G smartphone in the world, with a retail cost that is roughly the same as the average cost of a 3G smartphone in India.
IHS believes Samsung is likely to extend its partnership with Reliance beyond merely supplying handsets. The two companies are reportedly considering a joint venture that could open up huge opportunities for Samsung in India, one of the world's hottest emerging markets for smartphones.
Samsung and Reliance have both declined to comment on reports. But India is abuzz with rumors that Reliance will not only tie up with Samsung, but also with other leading mobile operators and handset vendors in an effort to ensure that its 4G launch is a game-changer for the entire Indian telecom landscape. Reliance has already invested nearly $3 billion to acquire 4G spectrum and plans to triple the size of its Reliance Jio team this year to 10,000.
But despite Reliance's bullish investment in a 4G future, there remain serious questions about when and if 4G will take off in India—a nation where 3G technology is still at the teething stage.
"I don’t really see a strong market out there," said Jagdish Rebello, research director for consumer and communications at IHS. Rebello said the biggest impediment to the success of 4G in India is not the price of the handset, but the quality and availability of service and the cost of 4G data packages.
Roughly 3 to 5 percent of smartphone users in India pay between $500 and $800 to get unsubsidized handsets. According to Rebello, there are generally two dominant categories of mobile phone users in India: low cost users, often living in rural areas, who use SMS to get information on crop prices, and urban users who need data on the go and would like to have mobile data and Internet access at 4G speeds.
"I am sometimes a little bit perplexed as to why India would need low cost handsets for 4G, because that target market has different demographics," Rebello said. "It could be a young entrepreneur, a businessman or a high-level executive who needs a significant amount of data at very high speeds. And for him or her, I don't think the cost of a device would really make a lot of difference."
The Indian cellular market took off several years ago, with consumers lining up to get their hands on basic handsets operating on 2G networks to make phone calls. But consumers have been largely hesitant to sign on to 3G data plans, which remain relatively expensive in India. The least expensive 3G plans cap data transmission at 2 gigabytes per month. And the availability and performance of 3G networks in India remains largely hit and miss.
"I think 4G will be another flop because of these reasons, especially the high cost," said Pavan Junaid, an engineering college student in Bangalore. "But, I suppose, in time it would become popular if the tariffs are lowered."
Observers believe Reliance is likely to offer very inexpensive, unlimited 4G data plans. They also expect Reliance to team up with local vendors to buy 4G handsets in volumes and offer them free with minimal cost.
Currently, the only telecomm operator to offer 4G in India is Bharti Airtel Ltd., which recently launched it in three cities. It has been largely unsuccessful, due to high cost and network performance issues with its 4G dongle. But with Reliance making noise about taking the lead in 4G, all handset vendors—including multi-national companies like Apple and Samsung and local Indian manufacturers such as Micromax, Lava and Karbonn—are drawing up plans for 4G in India. None have disclosed concrete plans. But industry experts maintain that 4G is a key component of future innovation.
Samsung has been extremely successful in the Indian handset market at 2G, 2.5G and 3G. But it will get a run for its money at 4G, with fierce competition expected from both multinationals and domestic Indian handset makers.
Asim Warsi, vice president of mobile sales at Samsung's Indian subsidiary, declined to comment in an interview on questions about Samsung's plans for collaboration with Reliance. But Warsi made it clear that Samsung plans to go the extra mile to succeed in the 4G handset market.
"The Indian mobile market is growing at an exponential rate, and Samsung has always been innovative," Warsi, said. "Its growth strategy continues to hinge on addressing consumer requirements with a robust and rich portfolio.
Warsi noted that the Indian mobile market is growing at an exponential rate—same 12 percent per year—and said Samsung's growth strategy would continue to hinge on addressing consumer requirements and offering robust portfolio of devices.
"Our efforts have always revolved around improvising and constantly working on next big advancement in technology to launch the most innovative devices in the Indian market," Warsi said.
So, the battle has begun in earnest, with not only Reliance and but also Videocon Telecommunications Ltd. and Tikona Digital Networks Pvt. Ltd. planning to offer 4G by early next year. Another operator, Aircel, has also launched trials in another state in India recently, but has yet to develop the required ecosystem—including the 4G-enabled mobile handsets—to launch the services commercially.
And as India's telecomm operators prepare to grapple over 4G, handset makers—both domestic and international—are gearing up to offer 4G handsets in India at subsidized rates.