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JioPhone Next may not disrupt the 4G market

Contrary to the hype that the JioPhone Next would offer disruptive and extremely affordable pricing, analysts remain underwhelmed with the ₹6,499 price point for the phone.

Experts believe that the phone will not cause major disruptions to the industry in terms of luring feature phone users, or be a major threat to Bharti Airtel which recently unveiled a scheme offering ₹6,000 cashback on eligible smartphone purchases.

Major buzz
JioPhone Next which generated major market buzz as a highly affordable smartphone is set for a Diwali launch on November 4 with a financing plan that entails the upfront cost of ₹2,500 (down payment plus processing fees) with the balance payable in 18/24 month EMIs which bundle tariff plans. It is also available without financing for ₹6,499.

Disappointed watchers
The much-awaited launch has left market watchers disappointed, as the pricing is much above the ₹3,500 cost anticipated for the phone.

“The pricing for the JioPhone Next at ₹6,499 (without financing) is non-disruptive and is higher than market expectations of less than ₹3,500 price point. Further, the features and pricing of the JioPhone Next are comparable to other smartphones available at similar price points and do not seem to carry any major subsidy element from Jio,” said a Credit Suisse report.

No new market base
Market experts were hoping that the new Reliance phone would be the way to get 300 million-plus 2G subscribers into the 4G fold. But, at a ₹6,499 price point, its is not too different from a typical entry-level smartphone.

Capital markets and investment group CLSA said, “We await RJio’s commercial launch and subscriber response to the offers but believe the high upfront front cost of ₹2,500 and high monthly EMIs starting at ₹300 will limit churn of incumbent 2G subscribers which typically have a monthly ARPU (average revenue per unit) of under ₹100.”

Price cuts expected
Some analysts believe that it is likely that Reliance Jio will look to recalibrate its pricing once it finds that the uptick for the smartphone is slow.

“In the past, Reliance had launched devices/services at higher prices, only to lower them after a few months. We see price cuts or exchange offers to incentivise feature phone users in the months to come,” said brokerage firm Jeffries.

Airtel wins out
Kotak Institutional Equities considers the bundled cost of the phone to be competitive with other entry-level devices such as Redmi and Realme financed through other retail channels. However, Kotak observed that Bharti’s smartphone financing options remain more attractive.

“Interestingly, Airtel’s recent offer of providing back-ended cashback of ₹6,000 on several smartphone devices seems less costly for customers on an overall basis than JioPhone Next; Airtel’s scheme also provides flexibility to choose from several popular devices which can be financed through other retail channels and a free screen replacement in the first year” Kotak noted. The Hindu BusinessLine

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