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501 Reasons to Switch! RIL Roils Telecom Segment Again – Here is How

Just when incumbent telecom operators thought that tariff wars in the sector had bottomed out, Mukesh Ambani’s Reliance Jio Infocomm on Thursday once again played the price card, the major beneficiary of which will be the 500-million-strong feature phone users who will now be able to upgrade to a 4G, VoLTE feature phone offering apps like YouTube, WhatsApp and Facebook, for as low as `501.

Since the JioPhone, as it is called, can work only on the Jio network, incumbent operators stand the risk of losing a bulk of their 2G subscribers or will have to offer them similar handsets at cheaper rates. The country’s largest telecom player Bharti Airtel, for instance has 75% of its users who are 2G customers.

Manufacturers of low-end smartphones with which JioPhone competes and with which incumbents have so far tied up to counter the JioPhone challenge said that any decision on price correction and product launch by them would be taken after seeing the response to the newly priced phone.

The JioPhone was first announced last July at the company’s annual general meeting with a refundable security deposit of Rs 1,500 (returnable after three years) and in the eight months since it hit the market has acquired 25 million users.

In an attempt to push sales further — Ambani has set a target of 100 million users in the shortest time possible — the price has been slashed to Rs 501 under Jio’s Monsoon Hungama offer. All that consumers will have to do to avail this price is to give their old feature phone in return.

As the JioPhone would have by August this year the three most popular apps — YouTube, WhatsApp and Facebook — at Rs 501 it would be a steal for the low-end feature phone user.

Since the announcement of the JioPhone last year, legacy operators Bharti Airtel, Vodafone India, and Idea Cellular have also tapped the low-end user market. However, they are not offering any subsidy on handsets but have forged partnerships with manufacturers like Karbonn, Itel, etc, which offer low-end smartphones in the price range of Rs 2,500-3,000 (effective price after cashback offers is lower).

Analysts said that by slashing the price down to `501 along with an exchange offer, Jio has tackled the biggest obstacle so far in the sale of these phones — what do people do with their existing handsets.
Further, not having WhatsApp was seen as a major deficiency, which has been tackled now.

“The Monsoon Hungama offer will impact Bharti/Idea’s feature phone revenues especially as their handset replacement cycle nears. We find Idea more vulnerable to this as the company is focusing more on voice/2G market,” Bank of America Merrill Lynch said in a note. The brokerage said that considering that JioPhone was given for free, the 25 million user base thus far is low.
Apart from the handset price, the lowest tariff package for such phones is Rs 49 per month under which voice calls are free and consumers get 1 GB data a month. This is the lowest tariff in the industry.
In addition, Jio will also introduce a high-end feature phone (Jio phone 2), which has wider screen and touch keyboard at `2,999 from August 15. However, this won’t have much of traction since around this cost proper smartphones are available in the market.

Handset manufacturers of low-end smartphones with which JioPhone competes told FE that they would wait and watch the response to JioPhone before either reducing prices of their entry level smartphones or launch newer phones at similar price points.

Gaurav Nigam, senior vice-president and product head, Lava International, said, “Pricing is always a factor of what competitors are offering in the market and the value that I have put in the device for the consumers. Whenever we launch our next product we will evaluate the market scenario; however, we want to design a reliable phone that gives the right experience to consumers and we will charge whatever is the right price for that. The Jio announcement has just happened today; we will wait and see how the market reacts to it.”

“We already have devices that are available at Rs 2,999. So we will wait and see how the market shapes up. At this stage, I don’t see an immediate need to slash our price because of the Jio announcement,” said Shashin Devsare, executive director, Karbonn Mobiles. – Financial Express

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