What Reliance Jio’s Chinese Smartphone Means For India’s Telecom War

Reliance Jio Infocomm Ltd. finally has a low-cost smartphone manufactured by a Chinese company as the telecom operator targets millions of users with feature phones and also tries to stem its subscriber churn.The operator collaborated with Itel, part of the Transsion Group of China, to launch the A23 Pro for Rs 3,899 last week. Buyers would get benefits worth Rs 3,000 in the form of vouchers on select prepaid recharges.The launch comes as Reliance Jio has lost active users during the pandemic. It has already announced additional discounts to stem the decline. According to an April note by UBS, the cheap smartphone is expected to accelerate the migration of 2G and feature phone users to smartphones, which could expand the average revenue per user and accelerate market share gains for Jio.India had 43 crore 2G subscribers as of January, according to the telecom regulator’s data. Migrating these users to 4G will be a key driver of revenue growth for the telecom industry..Bharti Airtel Gains The Most As Telecom Churn Doubles During Pandemic.UBS estimates that at an assumed ARPU of around Rs 55, the user base of 2G subscribers forms around 15-20% of the industry revenues. An increase in ARPU for these users could lead to a significant revenue expansion for wireless carriers.The cheap smartphone will help Jio also manage churn in the JioPhone segment, one of the key reasons for its slower addition of net users in recent months. There are around three to four crore JioPhone users, mostly consumers of low-end plans.According to UBS, when JioPhone users migrate to smartphones, they spend 10-60% more, depending on the operator and plan. These users are unlikely to downgrade to feature phones because of the desire to use video-streaming and other apps.The race to capture feature phone subscribers heated up after both Reliance Jio and Bharti Airtel Ltd. announced discounts for their feature phone customers during the pandemic period.According to a Goldman Sachs report, JioPhone users account for nearly 20% of the revenues for Reliance Jio. Bharti Airtel gets 30% of its wireless revenue from this low-end segment.For better data usage, they need smartphones. And the cheapest ones in India cost $90-100 (Rs 6,300-7,000). That’s prohibitive for feature phone users who typically spend $20-30 (or about Rs 1,400-2,100) to upgrade.Yet, Indian users seek to take advantage of one of the world’s lowest data tariffs. Smartphone shipments underscore this desire. According to a CLSA report, India mobile shipments (smartphones and feature phones) rose 7% year-on-year to 5.9 crore in the quarter ended March. The growth was, however, led by smartphones at 18% compared to an 8% rise for feature phones.And at Rs 3,899, Jio’s Itel A23 Pro costs about half the price of the cheapest smartphones. Its specs are:Light Android 10 GO operating system1.4GHz processor1GB RAM8 GB ROMExpandable to 32GB memoryA 2400mAh battery5-inch display2MP rear camera and VGA front camera.Still, these are at the low-end of the minimum specifications needed to provide a reasonable smartphone experience for video streaming and seamless application use. UBS, in its May note, said such low specs could hamper the smartphone experience.Given the manufacturing costs of the Itel A23 Pro, UBS said Jio also needs to absorb a subsidy of $15 (about Rs 1,080) a device. The company, however, could recover the losses in one to two years through higher ARPUs from the accelerated migration to 4G.This, however, will not apply if customers are mostly migrating from JioPhone, UBS said. To make it work, Jio needs to win over feature phone users..UBS On How A Low-Cost Smartphone Will Change Jio, Rivals’ Fortunes

What Reliance Jio’s Chinese Smartphone Means For India’s Telecom War

Reliance Jio finally has a low-cost smartphone as the telecom operator targets millions of feature-phone users.

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