Can JioPhone Next achieve Reliance's ambition of '2G-Mukt Bharat'?

Let’s first take a quick look at JioPhone Next, Reliance Jio’s much-awaited 4G handset which is to be launched today.
 
Apart from a 5.45-inch wide screen, 2 GB RAM and 32 GB internal storage, this entry-level smartphone will be powered by a 3,500 mAh battery which the company claims will keep the phone running for 24 hours. It has a 13 MP primary camera and 8 MP front camera. Another salient feature includes sharing of videos, files and photos without the Internet connectivity, something which will be a great help to consumers in rural areas.
 
With this new phone, Reliance Jio is aiming to migrate a large number of India’s 2G users to smartphones.
 
THE SPACE JIO IS EYEING
Telcos’ share of India’s wireless user base (%)
 
Jio: 37
Bharti Airtel: 30
Vodafone Idea: 23
BSNL + MTNL: 10
 
Source: TRAI (as of August 2021)
 
Among them, Airtel and Vodafone Idea (VI) have around 280 million 2G users, accounting for as much as 22-25% of their revenues. Reliance Jio, which has a market share of around 37% in terms of active mobile users, has been targeting this segment of 2G feature phone users as the next frontier for growth of its subscriber base and further penetration into rural India. 
 
Will an affordable smartphone remain a pipe dream for the common man? 
 
A cheap and affordable smartphone was the bedrock behind the Reliance chairman Mukesh Ambani’s plan of making India “2G-mukt”. And media reports had speculated that the smartphone, touted to be the big disruptor in the Indian market, would be priced below Rs 4,000, and would thus help Jio steal a large chunk of Vi’s and Airtel’s user base that still uses basic phones. However, if analysts are to be believed, the new smartphone may already have failed on that front.
 
According to International Data Corporation (IDC) India research director Navkender Singh, half of the country’s feature phone users use handsets in the Rs 1,000-1,200 price range and Jio’s objective was to capture customers from this segment.
 
Notwithstanding the much-hyped Diwali launch of the phone, developed jointly by Reliance Jio and Google, the shares of key challengers Vodafone Idea (Vi) and Airtel soared earlier this week. Analysts attributed this to the pricing for JioPhone Next, which they believe was beyond the reach of the common man despite the attractive EMI options.
 
IDC India’s Navkender Singh said: “Convincing a feature phone user to pay Rs 300 per month for a device plus a data plan will be a massive challenge. I believe the new phone will end up appealing to buyers in the Rs 5,000-7,000 segment and also those looking for refurbished smartphones. Smartphones in the below Rs 5,000 category account for only 5 per cent of the smartphone market while the majority is in the Rs 5,000-20,000 range.”
 
Multinational investment bank and financial services company Jefferies said JioPhone Next might fail to be the disruptor it was expected to be.
 
It said in a note: “JioPhone Next’s current pricing is not disruptive and does not offer any material incentive for feature phone or JioPhone users to upgrade to the smartphone. We expect Reliance to lower JioPhone Next’s price, just the way it did for JioPhone after launch. Even on an absolute spend basis, 2G feature phone users, low-end JioPhone users and high-end JioPhone users will have to spend 2.8 to 4.5 times more over a 24-month period to upgrade to JioPhone Next.”
 
So, by not discounting the handset price to attract buyers, and tying them with a Rs 300-600 EMI plan, the company is looking to better its average revenue per user, or ARPU. Let’s wait and see if JioPhone Next is able to help Reliance achieve its chairman’s stated goal of ‘2G-Mukt Bharat’.

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