A 3-year lock in? The many challenges for Jio’s 4G feature phone

Mukesh Ambani-controlled Reliance Jio Infocomm recently announced 4G-enabled feature phone, JioPhone, which you can purchase by paying a security deposit of Rs 1,500, refundable after three years. The bundled Jio connection will come with three different usage plans ranging from Rs 24 for two days, Rs 54 for a week and Rs 153 for a month.

However, according to a report by JP Morgan, there are several challenges related to the feasibility of the device, and there also are concerns over the product being attractively priced to induce habit-changing consumption.

According to JP Morgan, in India, where there is the prevalence of multi-SIM phones and the pre-paid monthly churn stands at around 5 per cent, it may be unrealistic to expect consumers to embrace single-SIM phones and get locked in for three years with them.

 

“In all likelihood, if the consumer can afford to pay at least Rs 153/month for three years, she is quite likely a smartphone user well before this three-year period runs out,” JP Morgan said in a report.

The report said a lot depends on the phone and its perceived smartness. The report said smartphone penetration of Airtel and Idea has crossed 40 per cent of their subscriber base even as a significant percentage of them are not broadband (3G+4G) subscribers yet. “We think the low-end of this smartphone subscriber base operates at clear sub-Rs 200 average revenue per user (ARPU). Consumers here will likely consider the pros and cons of downtrading to JioPhone from a smartphone they own now or intend to own in the future,” the report said.

However, what makes down trading even more challenging is the three-year lock-in imposed by JipPhone. “How willing would a sub-Rs 200 ARPU (non-smartphone) subscriber be to stay anchored to a 4G feature phone and not gravitate towards a smartphone,” it wonders, adding three years seems a long time to expect a subscriber to commit.

JP Morgan said it expects uptrading is going to much more likely than downtrading on JioPhone, an implication which should be benign for peers and the industry.

According to the report, Reliance Jio’s pitch with JioPhone is aimed at the feature phone segment and much less so at the entry-level smartphone or soon to-be-smartphone segment.

Also as the JioPhone comes preloaded with Reliance Jio apps, it is not known to what extent the device support embraces open and popular apps like WhatsApp and Paytm etc. There is also the matter of whether packing a phone with pre-loaded proprietary apps and closing off other popular free apps constitutes a violation of net neutrality, an issue the incumbents have raised in investor calls.

“Unlike Battle 1.0 (fought on ARPU i.e packing a lot more data content within a downsized ARPU bundle), Battle 2.0 is product-based, so we expect incumbents to bring to the market their version of VoLTE feature phones with pre-packaged plans,” JP Morgan said.

However, given the limited VoLTE network of incumbents, Jio has 9-12 months of head-start before equivalent offerings from incumbents.

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A 3-year lock in? The many challenges for Jio’s 4G feature phone

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