Jio’s new phone and its fresh battle with Airtel, Vodafone Idea

Reliance is aiming to target the 250-million entry-level mobile broadband customers, especially in the rural markets using 2G speeds offered by Airtel and Vodafone Idea. Analysts say that if Jio’s phone is successful in attracting these customers, it could have a material impact on the topline of the other two operators, along with BSNL.

Jio’s new phone and its offerings

Jio Bharat has been priced at an affordable Rs 999, which the company claims makes it the cheapest phone to support 4G internet in the country. It runs a suite of Jio’s own apps including JioCinema, JioSaavn, and Jio Pay, through which users can carry out UPI payments.

To ensure scalability, the company will conduct a beta trial for the first 1 million phones, across 6,500 districts, starting from July 7, Reliance Jio said in a statement.

Reliance has outsourced the manufacturing of the Jio Bharat phones to an Indian contract manufacturer. Besides Reliance, Indian phone maker Karbonn will also build its version of the Jio Bharat phone, meaning that there will be two different brands making the same phone.

It is worth noting that the latest phone is not part of the collaboration between Jio and Google – under which the two had produced the Jio Phone, and Jio Phone Next.

Currently, the operating system only supports apps developed by Jio, and It is unclear whether competitors in the respective segments would be willing to develop apps specific to Jio’s operating system – if that does not happen, then the phones could be limited to just Jio’s suite of applications.

A source at Jio said that at launch, the feature phone will not support other major applications like WhatsApp. Meta, the owner of WhatsApp, invested $5.7 billion in Jio Platforms in 2020 for a 9.99 per cent stake.

The big picture: Impact on other telecom operators

Another part of the jigsaw that Reliance seems to be relying on for selling the phone is a new tariff plan. It will offer a 28 day unlimited voice plan priced at Rs 123 which will also include 14 GB of data per month. Jio said that the current compatible plan offered by other telcos is priced at Rs 179.

Step into a 4G-powered digital life with #JioBharat at ₹999/- only. ⚡#DigitalIndia #JioSaavn #JioCinema #Music #India #Bharat pic.twitter.com/PSUDDxd6Oj

— Reliance Jio (@reliancejio) July 3, 2023

Analysts said that the pricing could sway Airtel and Vi’s 2G customers to Jio.

“We believe with this phone Jio can take market share at the lower end of the market. This also puts Bharti at risk as it can see increased churn from its recent 2G price action of increasing the Rs 99 plan to Rs 155 plan,” JP Morgan said in a note. “We believe this is negative for Bharti as any hopes of a tariff hike should be diluted over the next 12-18 months.”

Financial services firm Emkay said that the pricing could impact Airtel’s consolidated EBITDA by as much as 6 per cent. “Vi and Airtel had 103mn/111mn 2G subscribers at the end of Q4FY23, which contributed 26%/20% to their respective mobile revenue. Assuming 40% of 2G users shift to JioBharat, the impact on India’s mobile revenue for Vi/Airtel can be 11%/8% and the impact on EBITDA can be 19%/11%. It will impact Airtel’s consolidated EBITDA by 6%,” it said in a note.