Reliance Jio Infocomm could initially grab around 5% of Vodafone Idea (Vi) and Bharti Airtel’s 2G users with the new JioPhone Next – a 4G smartphone developed jointly by Reliance Industries and Google – in the next few quarters as multiple financing options and the device’s strong camera specs may attract feature phone users wanting to go 4G, said analysts.
They said JioPhone Next, which will be available in markets from Diwali, is likely to drive Vi and Bharti Airtel to abandon any near-term plans to raise tariffs in the higher revenue generating prepaid smartphone users segment, where the telecom market leader Jio is reckoned to be strong, to avoid any further customer churn.
“We believe JioPhone Next’s price-point is affordable, given the features offered and financing options available, and it could potentially enable Jio to attract around 5% of Vodafone Idea and Airtel’s 2G users in the next few quarters,” Nitin Soni, senior director at global ratings agency Fitch. “Vi, though, would be more vulnerable to such customer churn.”
Cash-strapped Vi has been unable to match Bharti Airtel and Jio on 4G capex spends, and is accordingly seen as more prone to customer churn.
The two older carriers together have nearly 280 million 2G users and Bharti Airtel recently doled out cashback offers to ringfence its 2G subscriber base in the run-up to JioPhone Next’s launch. Analysts estimate that the 2G users account for 22-25% of Bharti Airtel and Vi’s revenues.
Analysts, however, said that JioPhone Next, at its current Rs 6,499 price-point, “won’t be a disruptive game changer”. But the device, Soni said, would definitely “help Jio to further boost data growth and in turn, help improve ARPU (average revenue per users), resulting in higher profitability”.
Another global brokerage analyst, who did not wish to be named, said, JioPhone Next’s pricing could become more affordable once the semiconductor crisis eases. As a result, he said, it’s unlikely that Bharti Airtel and Vi would risk raising prices in the prepaid smartphone segment anytime soon as there are many price-sensitive users in that target group who could easily move to Jio.
The stakes, he said, are huge for Vi and Bharti Airtel as the prepaid smartphone users segment is estimated to generate 55-60% of their quarterly revenues.
Last Friday, Jio and Google had said the JioPhone Next would be available for buying from Diwali and that the device would be available for an upfront payment of Rs 1,999, with the rest payable in easy monthly instalments over 18 or 24 months.
Jefferies recently said Jio’s loss of more than 11 million subscribers in the September quarter –reducing its user base to below 430 million – is likely to prompt it to focus “strongly on subscriber additions via the JioPhone Next” in the coming months.