Jio's Rs 500 4G phone: Will it mark the end of 2G and 3G era?
Mukesh Ambani-led company has been a major disruptive force in the telecom sector.
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Reliance Jio, which captured a customer base of more than 100 million in a matter of months, and is still going strong at more than 112 million users, is in no mood to slow down. It now plans to make millions of consumers with tight budgets an offer they can't refuse. And it's likely they won't.
After wooing users with 4G data at throwaway prices, free calling and the preview of JioFiber – a fibre optic-based high-speed broadband service – the company is now planning to offer an affordable 4G-enabled feature phone to convince millions more to become part of the Jio boom.
Adding momentum to a slowing Juggernaut
Faced with shrinking growth figures – TRAI data reveals that Jio added only 4 million consumers in April, compared to 12.2 million in February and 18.48 million in January – the telecom giant is looking at infusing momentum into this juggernaut that is slowly losing steam. As per reports, this will be done with the 4G-enabled feature phone that comes at as little as Rs 500 after its annual general meeting on July 21, 2017.
Earlier, reports pegged the phone to be priced between Rs 999 to Rs 1,500, but a swift decline in user additions coupled with competitors scoring an advantage convinced the company's top brass to further subsidise the phone to make it cheaper and more accessible to the lower end of the consumer base that remains untapped because of bottlenecks in Jio's own 4G-based network.
Will Jio wave be the end of the 3G/2G dominance?
With an investment of more than Rs 1.9 lakh crore, the new kid on the block, Reliance Jio entered the telecom sector in India in September 2016. At a juncture when its competitors focused on the spread of the existing 3G framework, Mukesh Ambani changed the game by introducing a 4G-based data first network.
Owing to this data first approach and use of superior technology such as Voice over Long-Term Evolution (VoLTE), which enabled it to use data packets to deliver calling service at a fraction of the traditional cost, Jio caused a tariff bloodbath that soon translated into sharply reduced prices; existing players being bled dry.
But as irony would have it, it was Jio's use of superior technology which gave its competition hope. Faced with increased pressure, existing telecom operators held on for dear life to a consumer base Jio could not touch because of its lack of support for the 3G/2G-enabled phone.
What further scuppered its plans of market domination was a slower-than-expected introduction of low-cost budget 4G phones in the market.
However, as could be the case, with its latest gamble on July 21, Jio could change the game again and bring on board at least 50 per cent of the subscriber base of these incumbent telcos, and even use this 4G-enabled hardware in the market to its advantage.
Explaining the impact of the move in an HSBC Securities report, analysts Rajiv Sharma and Darpan Thakkar said, "Given Jio’s aspiration to own 50% of the market, it is a matter of time before it launches low-cost 4G feature phones in an attempt to expand 4G market. This may be the right move as competition is still catching up on 4G coverage and yet to deploy voice over LTE (VOLTE)."
Rs 500 4G phone the checkmate?
If the 4G feature phone rollout is executed well, the Indian telecom sector may soon see 4G becoming not only the preferred, but also the primary technology for the majority of the users in the country.
However, unlike what happened in September, any such swift move to newer technology would create a problem which cannot be easily fixed with another round of price cuts.
In a win-win for Jio, such a shift in the market will not only force its competitors to give up on the 3G/2G spectrum they bought for princely sums, but also push them to a corner where they will have to bite the bullet — and pour in billions more to quickly upgrade their network infrastructure across the country.
Yet, even that may not prove to be enough. The very lack of low-cost budget phones that initially hampered Jio's market domination plans could become the reason behind other telecom operators not being able to counter the 4G-focussed competitor's threat.
By the time the infrastructure and the supporting low-cost hardware is in place, the Rs 500 4G phone may well wreak havoc across the industry, leaving in its wake operators struggling to catch up.
This low-cost 4G feature phone punt could end up being the checkmate that Mukesh Ambani's Jio has been building up to since September 2016.