Jio is likely to price its 4G feature phone “at a paltry Rs 500 (sub-$8) to lure 2G subscribers to directly switch to 4G”.
New Delhi: Reliance Jio is likely to launch its much-awaited 4G VoLTE feature phone within this month, with brokerage HSBC putting the price at as low as Rs 500, a move which could bring in another wave of disruption in the telecom market.
The launch — which some believe could be announced at parent Reliance Industries’ annual general meeting on July 21— would follow Jio’s likely announcement of a new tariff plan with aggressive price-points over the next couple of days with its 84-day Dhan Dhana Dhan offer — announced on April 11 — drawing to a close, people familiar with the matter said.
Jio is likely to price its 4G feature phone “at a paltry Rs 500 (sub-$8) to lure 2G subscribers to directly switch to 4G”, which implies “Jio subsidising each handset by as much as $10-15 (Rs 650-975)”, Rajiv Sharma, HSBC director and telecoms analyst, said in a note seen by ET.
Analysts expect Jio to dangle a combination of an aggressive tariff offer backed with the mass-market 4G VoLTE feature phone to rev up active subscriber additions.
After a speedy start, Jio has seen a slow down in the pace of its customer acquisition, mainly due to the limited number of affordable 4G handsets in the market. But phones supporting 4G VoLTE and priced affordably can help the new operator target millions of 2G featurephone users who have been wary of shifting to smartphones due to the affordability factor and lack of use case. Jio has 112.55 million subscribers as of April 2017.
“This launch can create the next wave of disruption in the telecom market,” said a top executive of one of the leading telcos. “Not just us, but the existing players could surely lose a chunk of their low-end voice customers — most of whom are pre-paid - once this 4G featurephone is launched.”
Jio is the only operator which runs a 4G VoLTE network, while its rivals such as Airtel,Vodafone and Idea still are running trials on VoLTE but haven’t launched commercially.
“We won’t get into this device price war. Let’s see how deep the hit is,” the executive said, adding the “bloodbath in the market can continue for another year.” He was referring to the ongoing brutal price war since Jio’s entry last September which has hit the incumbent telcos’ revenue and profits and forced raid consolidation in the industry.
Jio appears to be ready to flood the market with its 4G devices, having placed orders for 18-20 million of the 4G VoLTE featurephones with some key Chinese original device manufacturers (ODMs) including Zhejiang Techain Electronics Technology Co., Shenzhen CHINO-E Communication Co, Crave and Megaphone. Handset makers sell roughly on average five million feature phones and 15 million smartphones a month.
People aware of the details said that shipments should begin from Julyend or early-August, with the company looking at a possible launch for August 15.
Jio didn’t reply to separate emails seeking comments on various aspects of the story.
ET had previously reported that Jio is likely to subsidise part of the selling price to make the 4G feature phones available at about Rs 1,000 (about $15) and would come bundled with unlimited voice and video calling, besides digital content.
“Given Jio’s $29 billion investment so far in the telecom venture, we don’t think the new 4G entrant would have any hesitation in doing so (subsidising),” said the HSBC note. Sharma expects the launch of Jio’s mass-market 4G feature phone “to happen any time from now” if the company is targeting urban low-end customers.
But if Jio’s target market for the device is rural, he feels, “the next couple of months may not be a good time since rural markets are linked to farming with seasonal cash flows, with the cash collection months being October and February when they, typically, harvest and sell their produce in the market.
A telecoms analyst of another global brokerage, who did not wish to be named, said Jio will try to touch lower price-points.
“Besides the Dhan Dhana Dhan offer, it has other plans that start at around Rs 150 a month, and they may introduce one at as low as Rs 80-90 for the same period with an aim to bring down the average revenue per user (ARPU),” he said.
Under the Dhan Dhana Dhan plan, Jio is offering free voice, unlimited SMS and access to Jio apps, and 1or 2 GB of daily data for a one-time payment of Rs 309 or Rs 509, respectively, to its Prime members, who paid a onetime fee of Rs 99
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