• Ajay Sharma

With The Launch Of JioPhone Next, What’s Next For Reliance? Definitely NOT A 2G-Free India!

Kya JioPhone Next Banaega Bharat Ko 2G Mukt? My Answer: NO!

 

I have been reading a lot of articles on the announcement of the JioPhone Next, the objective of it, its features etc., but not much has been written on its implications on the industry as a whole. This blog by me is an attempt to address those that have been missed out on as a whole.

The product will have an impact on the subscribers of the other operators, the customers and of course, the existing brands.

How Will It Impact The Operators?

As mentioned by Mr. Mukesh Ambani, the objective is to make India 2G Mukt and 4G Yukt which means upgrading the remaining 300 million+ feature phone users to #JioPhone Next.

Most of the 2G Feature Phone users are on networks of Airtel (131 Million) and Voda (149 million). It is Voda which is losing its base much faster, and hence is more prone to losing its base in case the JioPhone Next does get going.

For #Jio, it is both the upgrading of these 2G customers to 4G as well as upgrading its existing large base of 4G feature phone users to a proper smartphone which should lead to a much required increase in their ARPU. Even a small increase in the ARPU with their large user base would mean a substantial increase in their revenues.


So Who Are The Customers?

Who are the customers as per Jio – the 300 million odd 2G feature phone users and the JioPhone 1 users wanting to upgrade.

Talking about the 2G users, these are the ones who, for the last 3-4 years (since Jio came up with their first Jio Phone) have not shifted to the Jio 4G feature phone;

- In spite of the JioPhone 1 which came at an effective price of Zero.

- Did not go for the JioPhone 2, which showed that they were happy texting from a normal feature phone rather than a QWERTY keypad phone.

Why did they not go for a Jio 4G device despite the great offerings till now? Is it that:

1. They do not want to be stuck with a fixed expense on data every month? Or;

2. They are happy with the existing features of the small size of the phone, or its battery life or its ease of use or its ruggedness. Smartphones have all of these shortcomings.

3. They do not find much value in the offerings of the 4G feature phone being typically voice/text customers with very low ARPU.

4. COVID-19 spoilt their plans with its heavy financial impact on this category of customers. This is more relevant with its negative impact last year, followed by another one this year and a possible third wave which is being talked about.

So will the world’s cheapest 4G smartphone, which will still be more expensive than the existing 4G Jio feature phone be of any interest to them? Considering that the cheapest 4G smartphone today should be around Rs. 4000, assuming the JioPhone comes at Rs. Rs. 3490. The big question: Will these customers buy this phone? Will the so-called objective of making India 2G Mukt and 4G Yukt, be fulfilled? I am very doubtful! Assuming Jio decided to give a 50% subsidy on it, I am still doubtful as the cost of data would add to their monthly expense. Financing options will not work for this category of users.

However, the phone may be of great interest to the existing JioPhone 1 and 2 users being a proper smartphone with some great features, Google and Jio apps and what not.

How Does It Affect The Existing Brands?

I see three impacts on the existing brands:

1. Given the current COVID times, many existing customers in the lower price segment are wanting to downgrade instead of upgrading in the lower price segment. Jio can come up with some compelling offerings for it to happen. Most brands depend on upgrades from the lowest end for repeat sales and higher ASPs. They could be hurt.

2. Existing brands thus doing more with their devices in the mid-segment which would not be impacted in terms of more launches, more features, exchange offers etc. to induce buying aiming at reducing the replacement cycle and upping the ARPU to maintain their revenues.

3. High impact on the Indian brands with Jio in the lower price segment and the Chinese in the mid-price segment. For me, even #Xiaomi and #Realme need to stay alert here. The high end segment is still too small to generate additional volumes.

4. It is not that the migration from 2G will not happen at all. It will to some extent and that will lead to an overall growth in size of the low end Smartphone market which could be the potential market for the other brands in the next 1-2 years when these customers do plan to upgrade. So a short term disadvantage but a mid/long term disadvantage.

The issue for other brands does not end here. In fact, Jio is planning to launch an entry level 5G phone. After all Jio’s partnership with Google and #Qualcomm and Facebook/WhatsApp is the best combination one can dream of in the backend. In the front-end is Reliance Retail, the biggest mainline retailer by revenue, and #Jiomart getting into smartphone sales online soon.

However, to develop a decent 4G smartphone for a highly price sensitive 2G phone user meeting minimum hardware and quality standards is not going to be easy. Not even for Jio with #Google , especially in today’s times when component supplies are an issue and prices and shipping costs are moving up.


On the flipside, if anyone can shake up the market today and take on the brands having a stranglehold on the Indian market it is Jio. Let’s wait and watch.





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