Reliance JioPhone is on a quest to dominate the rural telecom market in India

Expect a lot of action in untapped, under-served segments as JioPhone converts 2G customers to 4G users.

Updated:Fri, July 21, 2017 3:59pm

By Sohini Mitter


The "effectively free" JioPhone which Reliance Industries announced at its much-hyped 40th AGM is nothing short of revolutionary. And we aren't saying that for effect. First, the JioPhone has no precedent. Nowhere in the world has a 4G-enabled feature phone been offered at a price tag of Rs. 1,500 refundable after three years that too. Second, Jio has identified a market segment that garners least attention from phone manufacturers. Third, there is the JioPhone and then there are the Jio apps all bundled into one. Fourth, Jio is doing to telecom what HUL did to FMCG with sachet pricing. Fifth, it plans to disrupt television viewing as well.

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The 'effectively free' offering

The JioPhone will be up for prebooking on August 26, and will go on sale in September. To get your hands on the device, you would need to deposit Rs. 1,500 at the time of purchase. They are eligible for a complete refund three years later provided they return the phone. This essentially means that even if buyers don't return it, they would be spending a mere Rs. 500 per year on the phone that allows them to call, message in multiple languages, input voice commands, watch movies, listen to music, read news, and also store more (via an SD card). That's not a bad deal at all. Besides the security deposit, consumers would have to pay Rs. 153 per month for Jio's Dhan Dhana Dhan plan. For smartphone users, the monthly plans start at Rs. 309. However, while data limits are capped on smartphones, feature phone users will have access to unlimited 4G data.

Industry analysts believe that it is unlikely anyone would return the phone after three years. It is also possible that they'd stop using the phone after 1-2 years once they get addicted to the apps on offer and feel the need for an upgrade. "JioPhone will shorten the upgrade cycle for feature phone users. Currently it is 3-4 years. It could come down to 1-2," a leading analyst told BGR India. Now, that means Jio will earn Rs. 1,500 on every device sold. Considering it plans to make 5 million feature phones available, it is targeting Rs. 750 crores in phone sales alone. Even if the company manages to make only half of that, there is the data revenue to fall back on. And that will be significant. ALSO READ: Reliance JioPhone: From 4G VoLTE compatibility to voice control, here are the top features of the feature phone


'India Ka Smartphone' for the nation

It's famously said that India lives in her villages. About 67 percent of India's 1.34 billion people reside in rural areas, according to World Bank estimates. 400-500 million of them still use feature phones. While the feature phone market is declining world over, it continues to grow in India. Consumers in rural India upgrade from one feature phone to another. The smartphone revolution has eluded them. "Either they can't afford a smartphone or they aren't aware of the new technology or they don't need it," Tarun Pathak of Counterpoint Research tells BGR India. "Despite this, feature phones as a segment has seen the least amount of innovation in the last 10 years."

JioPhone is neither a smartphone nor a conventional feature phone. It lies somewhere in between. And it is this 'in-between' segment that no smartphone maker had been able to spot so far. Reliance Jio is the first-mover in that segment and it will convert a whole bunch of 2G users to 4G by luring them with entertainment and information along with a low-cost device upgrade. Ambani announced at the AGM that Jio has built a robust 4G network within three years -- as wide as 2G became in two decades. Jio is fast and totally forward. Its strategy to chase the bottom-of-the-pyramid consumer, who's uninterested in a touchscreen phone, is its biggest bet. "While urban India went slowly from 2G to 3G o 4G, rural customers will skip those stages. They'll get high-speed internet straight from nothing," adds analyst Pathak.

Not just a phone, there's much more

The JioPhone will offer access to Jio's full suite of content apps that include JioMusic, JioCinema, JioTV, JioMags, JioXpressNews, etc. Typically, the MyJio bouquet has to be downloaded from Google Play Store. However, because it is a feature device, JioPhone cannot house Play Store. The phone comes pre-loaded with Jio apps. It spares the consumers of download hassles and also opens up an all new world on a platter. A farmer or a labourer in remote India could get through his dull day with some songs on JioMusic. There's FM radio too.

What this free access does for Reliance Jio is that it gives rural consumers the first taste of content which they have so far been unable to reach. It helps Jio optimize its content offerings which have had a slow uptick in urban India where it competes with established incumbents such as Saavn, Gaana, Hotstar, VOOT and so on. But the first-time 4G consumer has access to only Jio's app suite. Clearly, Reliance wants to push content adoption if its recent partnerships with original programming creators are anything to go by. It wants Jio to be the data pipe as well as the stuff that flows through it. ALSO READ: JioCinema now lets you download movies, shows; here s how it works

Differential pricing to win the rural market

Jio's sachet pricing, that includes 2-day and weekly data packs, is reminiscent of what Hindustan Lever did back in the 90s when it launched Rs. 2 packs for shampoos and detergents. Those bite-sized offerings cracked open the FMCG market and converted reluctant, price-conscious customers in rural India to try and buy new products. Sachet pricing became a new normal in the FMCG industry and was dubbed as a first-of-its-kind innovation by HUL which it replicated in other developing markets. Reliance Jio has taken a leaf out of that book.

With 2-day data sachets at Rs. 24 and weekly ones at Rs. 54, Jio has kept an option open for consumers to sample their offering without committing to a bigger plan (Rs. 153) at the outset. It makes 4G data more accessible and affordable for the lowest common denominator. Ambani said at the AGM that many feature phone users in these markets pay more than smartphone users and that is unfair. With JioPhone that claims to cover 99 percent of India's population in the next few years, the price pressure would be wiped out. And who knows sachet pricing could become the new normal in telecom too? ALSO READ: Reliance Jio: The real impact isn t of free data or aggressive pricing, but far beyond

Disrupting television viewing as well

Besides the feature phone, there's Jio Cable that can connect the JioPhone to any television set, even old CRT TVs which are what most rural households own still. This is disruptive and perhaps visionary. While it might slow down new-age TV sales in rural India, it'll allow customers to enjoy traditional cable as well as JioMusic, JioCinema and JioTV on their same-old TV set. It brings us back to the earlier point of Jio being ultra-serious about pushing its content. The Jio Cable, however, is priced higher than the phone plan. Customers would have to shell out Rs. 309 for a bundled phone and TV plan.

In a nutshell, Jio's plans are ambitious and they are fuelled by a parent (RIL) whose market cap crossed Rs. 5 lakh crore recently. It is India's most valued publicly listed company. Not to say that Jio would never fail. But if there's anyone who can burn and survive and eventually succeed, it is Jio. As for other telcos that are crying foul over "predatory pricing" and so on, they need a new vision to tackle the Jio juggernaut.

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