Reliance Jio's new big idea: 4G smartphones at Rs 3000 to migrate 2G users

Global and domestic mobile device manufacturers are in discussions with Reliance Jio to offer 4G smartphones in substantial volumes at a price pegged at Rs 2,000-3,000.

According to people close to the matter, Jio is looking at a ‘big bang’ migration of 2G consumers to 4G. It wants to push the pedal on more than doubling its monthly acquisition of 2G customers from competing telecom companies and the obstacle is that good quality, 4G smartphones are priced over Rs 5,000 — a stumbling block in the way of 2G consumers migrating to 4G.  

Jio has been adding about 6-9 million new customers month on month. Around three million of these came through the sale of its bundled Jio 4G feature phones which are on offer at a mere Rs 501 (consumers exchange it with their 2G device) or at Rs 1,095 bundled with free data and voice for six months. The device manufacturers say that Jio will support them to ensure volumes and viability. The move is part of iJio’s two-pronged strategy to increase revenues and subscribers in its next big wave of growth.  A Reliance Jio spokesperson declined to comment on the issue.

There are currently over 500 million customers with competing networks who are still using primarily 2G (a few use 3G). Jio wants to acquire these customers by migrating them to its 4G network in order to increase its customer base from 375 million at present to half a billion as quickly as possible.

In August 2017, the company introduced the attractively priced Jio 4G feature phones to make it affordable for 2G customers to migrate to 4G without having to pay much for a change in the device.

As a strategy, it’s been hugely successful. Jio has sold over 100 million 4G feature phones. Jio says the device manufacturers it is having talks with are keen to support Jio’s customer acquisition strategy by assuring Jio of large volume sales of 4G devices within a particular price range.

“The problem currently is that a majority of the 4G LTE phones available in the market are priced at over Rs 5,000 and that is not affordable for many 2G customers looking to upgrade to 4G. To increase migration of 2G customers you need devices costing between Rs 2,000-3,000,” said a source.

Analysts say Jio has to go alone in this effort primarily because competing telcos are not looking at a speedy migration to 4G through a good quality but reasonably priced smart phone. The reason is that some of them still do not have a nationwide 4G network and their 2G customers have reasonable Arpus as they pay substantial tariffs on voice, which is virtually free in 4G.

Jio’s plan is in many ways similar to what it did when device manufacturers were initially chary of launching 4G VOLTE phones as Jio was the only player offering this technology for voice.  

Jio took it upon itself to source and manufacture the phones under the Jio Lyf brand name in December 2015, becoming one of the largest device players in the country. It was only then that independent device players, sensing the change in the market, decided to launch their own VOLTE models. Jio then gradually withdrew from the device market.    

Jio’s second big planned push is to acquire customers aggressively for its enterprise business. According to its assessment, IT firms spend about 12.5 per cent of their operating costs on telecommunications, while the rest goes to technology companies offering, among other things, cloud computing solutions.

Unlike most other telcos which only offer the communication solution, Jio wants to play in the entire space by also offering other solutions. To this end, it has tied up with Microsoft to bring in Azure Cloud on its network and offer enterprises and small companies cloud data centres at lower prices.