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India's Reliance Jio extends free services, as telecoms price war intensifies

Reuters
A Reliance employee demonstrates Jio LYF phone at their headquarters on the outskirts of Mumbai, India, June 1, 2016. Picture taken June 1, 2016. REUTERS/Clara Ferreira Marques

By Promit Mukherjee

MUMBAI (Reuters) - India's Reliance Industries announced a three-month extension to an offer of free data and voice services by its telecoms unit Jio, signaling that a brutal price war in India's mobile sector that has already hurt its rivals is intensifying.

Reliance Chairman Mukesh Ambani, India's richest man, said in a live feed on YouTube on Thursday that Jio's existing and new customers will get free voice and data till March 31, 2017. The free offer was earlier valid till Dec. 31.

Jio had made a splash in September by offering the free data, and rivals such as Bharti Airtel have been forced to respond with price cuts of their own, though at a steep cost.

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After Ambani's announcement on Thursday, Bharti shares slumped 2 percent while Idea Cellular Ltd plunged 6 percent.

Ambani added that Jio has crossed 50 million customers in the three months since launching on Sept 1, and accused its competitors of unfair tactics, including blocking voice calls made through Jio to other networks.

Jio has so far invested over $20 billion in establishing a country-wide telecoms network, but still lags well behind Vodafone's around 200 million customers and Bharti's more than 257 million subscribers.

Vodafone last month reported a first-half net loss of 5 billion euros ($5.5 billion) after writing down the value of its Indian business by the same amount due to the price war sparked by Jio's arrival.

The outlook for the telecoms sector took a further hit since Prime Minister Narendra Modi imposed a ban on 500 and 1000 rupee denominated notes, sparking an intense cash crunch that threatens to erode consumer spending. Most Indians still use cash at local touchpoints to recharge so-called pre-paid connections.

But the move also boosts service providers such as Bharti that are expanding into digital payments.

Ambani on Thursday also announced that Jio would roll out Jio-Money Merchant Solutions, a mobile payments application, for enabling digital payments for small merchants at their various point of transactions.

The application will be rolled out from Dec. 5.

(Editing by Rafael Nam and Muralikumar Anantharaman)