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JioPhone Next will help Jio improve ARPU

JioPhone Next may not turn into a disruptor in the smartphone market but will help Reliance Jio improve its average revenue per user (ARPU), say analysts.

The Rs 6,499 smartphone opened for booking Friday evening. Customers can also acquire the 4G-enabled handset by paying Rs 1,999 initially and the rest in equated monthly instalments (EMI) of Rs 300-600 over 18-24 months.

“We believe that JioPhone Next will help the company to boost data growth and in turn help in improving ARPU and higher profitability. It will also accelerate adoption of 4G service and help in Jio’s subscriber growth,” said Nitin Soni, senior director, Fitch Ratings.

Another telecom sector analyst pointed out that Jio is looking at value rather than volume. “There appears to be a shift in Jio’s strategy. It has not discounted the handset price to attract buyers and by tying up customers with an EMI of Rs 300-600 it has focused on improving ARPU,” he said.

The company reported ARPU of Rs 143.6 in second quarter FY 2022. Its first quarter ARPU of Rs 138.4 was lower than that of Bharti Airtel which reported ARPU of Rs 146.

The JioPhone Next is a part of Reliance’s strategy to win over 300 million 2G subscribers. The phone which has been developed along with Google was supposed to be launched on September 10 but the launch was postponed as chip shortages impacted its production.

Increase in chip prices is also pushing up smartphone prices across brands.

The current pricing of the JioPhone Next could also be on account of supply side challenges, said Naval Seth and Sonali Shah of Emkay Global Financial Services Limited in a report.

Jio did not comment on the handset pricing which has been dubbed by some analysts as unattractive for bottom of the pyramid consumers. Convincing feature phone users to pay Rs 300 per month for device plus data plan will be a massive challenge, said IDC India’s research director Navkendar Singh.

A person familiar with Jio’s strategy said that matching price with other budget smartphones was not the company’s objective. JioPhone Next, he said, has an optimized version of Android and packed with unique features like voice translator or language assistant that are not available in similarly priced phones. The phones are also targeted to certain categories like students who have been studying from during the pandemic.

Soni said the JioPhone Next’s price point is affordable considering its features and availability of financing options.

Emkay Global however believes that the phone’s pricing is not lucrative for the masses. “In our view the bottom of the pyramid/non data subscribers might not have the propensity to pay the upfront cost of Rs 1999 and high monthly EMIs. Looking at the device cost we believe that the target audience for this would be the mid-segment subscribers, that is customers using mobile phones in the range of Rs 5000-8000. Apart from first time users, replacement demand could be a big potential opportunity to gain volumes,” Seth and Shah of Emkay Global said. Business Standard

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