Reliance Jio's smartphone may have little impact on tariffs, say experts

Reliance Jio’s announcement on unleashing a cheap smart phone in the domestic telecom market is reminiscent of the company’s aggressive marketing strategy adopted at the time of the company’s launch.
 
On Thursday, Reliance Jio said it would launch JioPhone Next, a smart phone developed in partnership with Google. Experts say the move is expected to have little impact on tariffs but will propel a smoother and faster transition to 5G. “Affordable and simple pricing plans have been the key to the large-scale adoption of telecom services in India. Speedy adoption of 5G is imminent in India with the digitisation of various sectors including health care, education, and agriculture through partnerships with content providers and application developers. A transition to 5G will definitely be much faster than the adoption of earlier generation technologies,” Peeyush Vaish, partner & telecom sector leader, Deloitte India.

 
Jio joined the Indian telecom space in September 2016, offering cheap feature phones bundled with free data and unlimited calling.
 

The aggressive entry not just established the company as a strong mobile service operator, it was responsible for wiping out smaller rivals from the market. “The Jio-Google affordable smart phone is targeted at 200 million plus 2G feature phone users and the launch will help Jio to gain a larger share from this segment. Jio has been gaining customers from Vi and this will accelerate growth. The phone launch will not have any material impact on industry tariffs,” said Nitin Soni, senior director, Fitch Ratings.

 
The brokerages say the proposed move may see acceleration in net subscriber add­itions for the company from September 10, on the auspicious day of Ganesh Chaturthi. However, it may have no material impact on the existing feature phone users.
 
“We believe price is not a key challenge in smart phone adoption in India. Many users prefer feature phones due to their ruggedness, long lasting battery and less complex UI (user interface). (The) average smart phone price in India is well over $150 and there is low demand for smart phones in the Rs 4,000-7,000 range. We believe new 4G phone may cannibalise other brands, but fail to attract significant proportion of feature phone subscribers,” Edelweiss said.

 
Last year Google had anno­unced an investment of Rs 33,737 crore for a 7.7 per cent stake in Reliance Industries’ technology venture, Jio Platforms. The tech giant had also teamed up on technology initiatives, including developing affordable smartphones, for the price-sensitive, tech-savvy Indian market.Some brokerages say the announcement is an aggressive one because the 5G ecosystem is yet to fully develop.
 
“(The) RIL chairman’s announcement of a launch date for JIO Phone Next smartphone, jointly developed with Google, as early as 10-Sep is a positive surprise, in light of global chip shortages and supply-chain bottlenecks,” IIFCL said. IIFL Securities says, along with delays, cost increases are also likely to be a notable challenge due to the recent rise in component prices. Despite this, if JIO manages to price the smart phone around Rs 4,000, it would be a significant achievement.

 
India is among the biggest smartphone markets globally with devices under Rs 10,000 ac­c­ounting for a significant share.