Jio’s 4G handset likely to force rivals to revisit phone strategy
NEW DELHI: Reliance Jio Infocomm Ltd’s launch of a 4G feature phone that is effectively free will force Bharti Airtel Ltd and the Idea Cellular-Vodafone India combine to revisit their own strategies regarding phones, say analysts.
Indian telcos have traditionally steered clear of bundling phones and (tariff) plans, but these firms may now consider doing this, even making their own phones, the analysts add.
A Bharti Airtel spokesman declined to comment. A spokeswoman for Idea Cellular did not respond to a query seeking comment till press time.
“Until other handset vendors launch their own version of 4G feature phones, subscribers with an ARPU (Average revenue per user) of more than ₹100 who will be coming up on the replacement cycle of their feature phones, are likely to find the JioPhone a compelling option,” Goldman Sachs Equity Research said in a note to its clients on July 24.
It isn’t just incumbent telcos that face the heat from Reliance’s latest move. Makers of low-cost phones such as Micromax, Intex and Lava, also do.
Their challenge is “to come up with newer/different entrylevel 4G handsets at lower prices may well determine their fortunes in the ultra-budget smartphone category,” JP Morgan Asia Pacific Equity Research said in a July 24 note.
Meanwhile, it remains to be seen if telcos that have hitherto refrained “from subsidising” phones are forced to do so by Reliance Jio, JP Morgan added.
“The top 3 incumbents are at high risk from 4G feature phone disruption, given they account for 60% of all 2G data users. Every 1% fall in our mobile revenue forecasts would hit our Bharti Airtel valuation by 2.5%, while the Idea Cellular valuation would be hit by 8%, all else being equal,” CLSA said in a July 22 note.
India’s second and third largest telcos Vodafone India and Idea Cellular are in the midst of a merger that will create the country’s largest telecom company.
In India, feature phones still outsell smartphones with total shipments of 136 million (as against 113 million for smartphones) in 2016-17. There are 500 million feature phone users in India, and 70% of these have average monthly revenue per user of ₹50 or less. The remaining 150 million feature phone users have higher monthly billings. The replacement market for feature phones at the margin are seen as the twin target markets of Jio’s 4G feature phone.
According to CLSA, around 150 million feature phone users come under a risk of churn to Jio, driving market share shifts to the tune of 15% of sector revenue.