Reliance Jio’s newly launched JioPhone, aimed at over 50 crore feature phone users, will pose a stiff challenge to incumbents to protect their subscriber market share, analysts say.
According to the global investment banking firm Jefferies, the monthly plan compares favourably against the blended ARPU (average revenue per unit) of top three incumbents, but it does provide a cap.
“Even though the pricing is not as disruptive as feared, it will still be a stiff challenge to incumbents to protect their subscriber market share,” Jefferies said in a report.
Jio launched its much-awaited 4G feature phone which will be made available from September. The device is priced at Rs 1,500, collected as a fully refundable deposit and refundable at the end of three years.
“The key driver for adoption of Jio phone would be access to a variety of digital services, which were earlier available only to the smartphone customers. We believe Jio has been rational about pricing their service and, unlike in the smartphone market, in the feature phone market, we do not see Jio’s entry resulting in lowering of telecom spending by customers,” BNP Paribas said in its report.
The company is targeting shipments of 5 million phones a week. The monthly plan for Rs 153 would offer unlimited voice/SMS and 0.5GB of data per day. There are two sachet plans for Rs 24 and Rs 54 with validity of two and seven days, respectively.
“We believe that, apart from attractive price point, JioPhone has differentiated features such as TV mirroring and voice assistant, which will drive mass adoption in the current 500 million feature phone market, significantly increasing its addressable market,” said Edelweiss Securities.
“We expect competition to selectively introduce unlimited voice plans for feature phone users to retain subscriber base, which will drive volumes and compress realisations,” it added in a report.
The phone can be connected to television through a Jio Phone cable. However, this will require enrollment to the Rs 309 per month plan (1GB per day allowance) which will allow three-four hours of daily video streaming.
“We believe that the pricing on both device as well as plan is not as bad as feared for incumbents. While refundable, the cost of acquiring the device is not game changing when compared against existing feature phone prices. The Rs 153/month plan too compares favourably against the Rs 142-158 ARPU across Top-3 but does create a cap,” the Jefferies report stated.
The report said that in the context of a higher addressable market for Jio, competitive dynamics for incumbents will be two fold — ARPU splicing/erosion in higher ARPU subscription (already underway) and subscriber churn.
“Since Jio’s voice offering is based on VoLTE, Jio phone proliferation will mandate increase of coverage. This will lead to high speed R Jio network in remote areas, which the 2G and at best 3G network footprint of the incumbents will struggle to compete against. Incumbents would have to accelerate their 4G network spending to match up to this,” the report added.
