Reliance Jio fishes in 2G user waters with 4G-powered Bharat Phone

Reliance Jio is targeting a 40 per cent share of the country’s 250 million 2G subscribers in the next few years with the disruptive launch yesterday of its 4G powered Bharat Phone priced at Rs 999. The phone comes with apps like Jio Saavn, Jio Cinema, UPI, a camera and an FM radio.   

The plan is to begin with one million phones in the first phase targeting 6500 tehsils, mostly in class B and C cities. The phone is being assembled to begin with by United Telelinks. Apart from making the phone for Jio, United Telelinks will also use the platform to offer 4G feature phones at the same price under its own brand Karbon. Jio is also in talks with other brands such as Lava to use the Jio platform to build a similar phone and sell it under their brand and also for supplies.

Most of these companies are eligible for incentives under the production linked incentive scheme and the volumes which they are looking for could give a big boost to local players. 

A Reliance Jio spokesperson did not respond to a query on its target. Nor did United Telelinks or Lava.

Nearly 70 per cent of the 2G subscribers use 2G phones priced over Rs 1,000. This is the second time that Jio has used its 4G feature phones to upgrade 2G subscribers to the next generation technology. In 2017, it launched the Jio Phone, a feature phone powered for 4G which helped the telco woo 110 million 2G customers to 4G.

But the move by Jio to rope in other branded  mobile companies to fill a gap in the market through its Make in India platform has received a mixed response. “I don’t think one can make any margins at this price. It could be a tactical move to get some volumes but it does not work for us,” said an executive with a leading Indian mobile phone company.        

Jio wants to increase its market share in a scenario where the overall subscriber base is growing very slowly. If it succeeds, it will be able to increase its sub base from 439 million to 539 million and gain over 47 per cent of the market. It is targeting 2G customers with VIL, Airtel and BSNL to persuade them to move to  4G.

The 2G market is still important for both VIL and Airtel, accounting for 26 per cent and 20 per cent of their respective mobile revenues.  If Jio grabs a 40 per cent market share, it will impact their revenues and EBIDTA margins.  

But 2G customers have been hesitant to upgrade to 4G which is why nearly 60-70 million 2G feature phones are sold every year. These customers want to replace a 2G phone with another, rather than upgrade. They are unwilling to pay the high cost of a 4G feature phone (Rs 1600 and above) and are further put off by telcos recently increasing the minimum entry tariff  of 4G to  Rs 179 a month.

Jio is playing the price game at both ends. The phone it offers is nearly half the price of any other feature phone. On the tariff end, it is offering a minimum tariff in 4G at only Rs 123 and that too with more data than the competition.

For the industry, it is clear that Jio’s price war has not ended; it wants to win more market share and so a tariff hike is highly unlikely at least for a while.

But competitors say that the shift will take a long time and will be limited only to players who are looking for a replacement of their 2G phones. “We don’t see price sensitive 2G users junking their 2G phones, paying up to Rs 1000, and going to 4Gg,” said a senior executive of a rival company.

The Jio phone only works with a Jio SIM. Airtel has eschewed the bundling of phones and has preferred to stay away from subsidizing it. However, competing company executives say they will ensure that their 2G subscribers don’t walk out.