Mukesh Ambani’s 4G Phone Targets Two-Thirds Of India’s Mobile Phone Buyers
Reliance Jio’s next target: 50 crore ‘data deprived’ feature phone users.
India’s youngest telecom operator Reliance Jio Infocomm Ltd. has launched a 4G-enabled feature phone as it looks to tap a market that contributes two-thirds of the handset sales in the country.
The JioPhone, essentially a basic phone with some capabilities of a smartphone, will be “effectively free”, said Chairman Mukesh Ambani at the 40th annual general meeting of its parent Reliance Industries Ltd. Effectively free, because a customer would have to pay Rs 1,500 upfront as a security deposit which will be refunded after three years on returning the phone. “Net-net, you pay nothing for the JioPhone,” Ambani said.
The move is driven by Reliance Jio’s need to increase its subscriber base, which according to brokerage CLSA, has hit the “4G device hurdle”. The Ambani-backed operator, with its free services, had seen the number of customers grow to 11.74 crore in May, but additions have slowed down since it started paid operations in April, after six months of free services.
“The JioPhone should support mass market adoption of 4G data,” said UBS Research in a report. India has the second highest number of internet users in the world, but penetration is still low as they are just 27 percent of the population, according to World Bank. Almost 80 percent of those use mobile for data consumption, showed a report by Kleiner Perkins Caufield & Byers. Networking giant Cisco has forecast internet users in India to more than double in the next four years.
Jio offers reprieve to over 50 crore “data-deprived mobile feature phone users” in India, Ambani said, adding it’s part of Prime Minister Narendra Modi’s Digital India initiative.
Feature phones still outsell smartphones in India. Nearly 65 percent of India’s handsets are feature phones with annual sales of around 13.6 crore devices compared to 11.3 crore yearly smartphone sales, CLSA said in a report in July. Reliance estimates around 50 crore feature phones in India.
Also Read: Reliance Industries' Triple Play
Reliance’s JioPhone isn’t a conventional feature phone though. It will support 4G services, including Jio’s free voice calling, along with some advanced features like near-field communication, voice commands, web browsing and pre-loaded Jio applications. More interestingly, Ambani said that the phone is capable of casting content on all types of television sets through a cable. It will feature a distress button too for emergency.
Ambani has also promised a software upgrade which will allow user to connect to their bank accounts, Jan Dhan accounts and UPI accounts with the phone.
It is not clear what the exact specifications of the phone are or who will be manufacturing it. Taiwan’s Foxconn, the maker of Apple’s iPhone, will be manufacturing the JioPhone, Bloomberg reported citing sources who requested anonymity, adding that Reliance Jio may also tie up with Taiwan’s Wistron Corp.
The phones will be available for beta testing from August 15 and for pre-booking for August 24, Ambani said. It will be available for sale on a ‘first come, first served’ basis from September. The operator will look to make 50 lakh phones available every week, and plans to manufacture all JioPhones in India from 2018.
‘Steep’ Tariff And Upfront Deposit
Jio is offering a Rs 153 per month plan for JioPhone buyers, which will offer them the usual free calling, access to Jio apps, along with 500 MB of data every day. All other tariff packs by Reliance Jio will also be available for the JioPhone.
It has also unveiled two “sachet” plans that offer a week’s service for Rs 53 and Rs 23 for two-days.
Jio may not be able to penetrate the mass market as the monthly tariff and the initial deposit is still “steep for low income consumers”, said Bank of America Merrill Lynch in a report. The brokerage said the plans would still hurt smaller telecom operators which would lead to faster consolidation in the market.
CLSA estimates that about 30 percent of feature phone smartphones generate an average revenue per user of Rs 150-180. The other 70 percent clock Rs 50 or lower per user.
In spite of the subsidised offerings, the net impact on Jio's value will be lower as a larger subscriber base would bring annual savings of around Rs 8,400 crore (assuming it adds 10 crore users through JioPhone) in interconnection charges, the brokerage said.
It had earlier said that Reliance Jio requires around 11 crore active subscribers and an average revenue per user of Rs 300 every month to break even, after pumping in investments to the tune of Rs 1.9 lakh crore for improving infrastructure.
CLSA expects the telecom sector’s revenue to fall 7 percent year-on-year in FY18 led by “promotions and retaliatory tariffs”, and a rebound is likely only in FY19 when Reliance Jio starts charging customers fully.
Unique Offering?
The JioPhone will stack up against existing feature phones under the Rs 1,500 bracket like Lava Arc Selfie, Itel it5060, Ziox Star Victa and HMD Global's Nokia 105 in India.
"Usually, to buy a 4G enabled phone you'd have to spend over Rs 3,000", Anis Sayyed, a local mobile handset retailer told BloombergQuint. "You cannot download applications on feature phones that we have in the range of Rs 1,500, but the JioPhone comes with pre-loaded ones", he added.
While all the phones have dual sim support, and expandable memory, the JioPhone is the only one which supports 4G services. Except for the Nokia 105, all other phones are capable of web browsing.