During the 40th AGM of Reliance Industries, Reliance Jio Infocomm (RJio) has introduced what appears to be the next major disruption for the Indian telecom sector, quite soon after its first move of offering free services to roll out its telecom venture in September 2016. In nine months since launch, RJio has been able to garner 117 million subscribers, making it one of the fastest scale-up. However, its growth potential had been restricted to the number of smart-phones, which is a smaller market in comparison to the feature-phones in the country. To address it, RJio has now launched JioPhone which is priced in the range of a feature-phone but gives 4G connectivity, thereby removing the device limitation to access data-driven content. As per the initial understanding of the plan, JioPhone can be bought by paying a refundable security deposit which is refundable after 36 months, touting the phone to be free. For Rs. 153 per month, the subscribers get free voice and unlimited data (as per the Fair Usage Policy). The device comes with a cable offering connectivity to television but that is available only with Rs. 309/month plan and gives a fixed quantum of video content per day.
Speaking on the launch of Jio phone, Mr. Harsh Jagnani, Sector Head and Vice President, Corporate Ratings, ICRA Limited said: “As per our initial impression, JioPhone is likely to keep the competitive intensity of the industry high with RJio targeting strong addition of lower-ARPU subscribers and/or rural subscribers. While the pricing is high in comparison to the ARPU levels prevailing at this band of subscribers, the proposition of unlimited content is attractive, and that too with a device which is priced marginally. If this proposition sees wide acceptance, it will pose serious competition to the other players, although smaller players will be more threatened. At the same time, in the longer term, JioPhone can push up the overall ARPU levels of the industry”.
Tariff of Rs. 153 per month translates into ARPU of Rs. 130 for RJio. In contrast, for Q4FY2017, the ARPU of Bharti Airtel stood at Rs. 158, while that of Idea Cellular stood at Rs. 142 which reflects the blend of both urban and rural subscribers. RJio offering base ARPU of Rs. 130 heralds uplift in the ARPU of the industry. But this gain will fructify over longer period till the rural subscribers get captivated to higher data usage, albeit at a higher monthly cost.
However, clarity is required on many uncertainties before one can make a certain call on the future potential of JioPhone. JioPhone is a bundled phone meaning that the subscriber is tied to a specific service provider i.e. RJio while using this phone. Traditionally bundled phones have not done well in India, leaving apart the minor success CDMA enjoyed in its initial days. Also, bundling of apps with the phone remains a tricky issue because of concerns of a ‘walled garden’. It remains to be seen whether the device offers the flexibility to use other apps, primarily those based on android platform without which it offers very restricted use. Further, marketability and acceptability of JioPhone would hinge on the kind of data experience it offers to the users without the port to connect to the TV, which comes at a higher monthly charge.
JioPhone is designed indigenously and manufacturing too is likely to be indigenous, deriving on the strength of frugal engineering to reduce costs. Still, it is not certain what kind of subsidization RJio is absorbing to offer the device for Rs. 1500, that too refundable, which can increase the funding requirements of the company.
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