Telcos focus on 500 mn feature phone users

Telecom players are warring over this segment to gain market share

After fighting for customers in the metros and big cities, telecom operators have shifted their focus to rural and smaller towns. Operators are trying to capture a pie of the 500 million strong customer base there, who currently use feature phones but aspire to own a smartphone.

Reliance Jio was the first one to tap the feature phone customers with the launch of its ~1,500 4G-enabled feature phone in July. The Mukesh Ambani-owned firm, which had already rattled the incumbent operators with its free and cheap offerings, led to the shift towards this segment of customers, as the market in metros and other big cities saturated.

The country’s top operator Bharti Airtel has already announced a bundling partnership with local handset maker Karbonn, wherein the Sunil Bharti Mittal-led company is offering a smartphone for an “effective price” of ~1,399. The company has made it clear that, going forward, many such partnerships would be forged, as it looks to provide a smartphone at an affordable price to customers, who wish to upgrade but face financial constraints.

According to an official of Airtel, the company is targeting to convert customers, who currently use feature phones and aspire to own a smartphone. Other incumbent players, including Vodafone and Idea Cellular, too, have confirmed to Business Standard that they were in talks with handset operators for similar partnerships.

Analysts say the incumbents have to come out with partnerships with handset makers if they have to protect this customer base of 500 million users. An industry executive said that most of the feature phone users were customers of the top-three incumbents, mainly using 2G services.

“The ~1,500 device announced by Jio could have been an attractive proposition for these users, so the incumbents are now coming out with plans, wherein the cost of the smartphone has been lowered for bundling,” an industry veteran said on condition of anonymity.

Although Airtel is not subsidising the device, the cash back of ~1,500 makes it an attractive deal. “It could compete with JioPhone, at least within the high-end feature phone user segment,” a Morgan Stanley report said.

According to an earlier report by UBS, the JioPhone would support mass market adoption of 4G data. “We expect Jio to thus continue to gain market share from smaller operators as the sector consolidates,” UBS said. A Deutsche Bank note said Airtel’s bundle would aid in garnering a significantly higher share of the subscribers who are likely switch over the next 12-18 months.

Reliance Jio was the first one to tap the feature phone customers with the launch of its ~1,500 4G-enabled feature phone in July