India’s 1 billion plus phone users will not raise any question on the quality of Airtel 4G phone vs JioPhone that were introduced in order to expand 4G market penetration.
Though Airtel’s was a response to the cost effective feature phone from Reliance Jio, Airtel’s data and voice bundle offer is much better than that of Reliance Jio.
Mukesh Ambani-promoted Reliance Jio introduced a “cheap-looking” phone to enhance its presence among rural Indians. The company claims that it received overwhelming response for its “zero-cost” offer for the country’s first feature phone with VoLTE facility for making calls.
Airtel, an established telecom operator promoted by Sunil Mittal, has responded with a smartphone from Karbonn Mobiles with voice and data offer. The challenge for Airtel is to sell the phone with an upfront payment of Rs 2,899.
“Bharti Airtel’s handset bundle is better than Reliance Jio’s feature phone offer,” said Deutsche Bank Research Analysts Srinivas Rao and Peter Milliken in a research note.
Airtel is offering a subscription plan of Rs 169 per month along with the 4G smartphone. The mobile customer gets a cash refund of Rs 1,500 and can retain the phone at the end of 36 months implying an effective cost of Rs 1,399 for the handset.
Reliance Jio 4G customers need to make an upfront payment of Rs 1,500 for the JioPhone and take a subscription plan of Rs 153 per month. At the end of 36 months, the customer gets cash refund of Rs 1,500 but has to return the phone to Jio implying zero cost for using the handset.
Deutsche Bank Research says both the tariff plans are comparable and offer unlimited voice and 0.5GB per day of data. Because the 0.5GB data is not useful for high-end video usage or other applications, the phone user will be forced to make more payment for using additional data on the 4G network.
Airtel says its 4G is available in all 22 circles. It does not reveal the 4G penetration in cities and small towns. Reliance Jio, according to OpenSignal, enjoys the maximum availability across India as against Bharti Airtel or Idea Cellular.
Airtel had an active subscriber share of 26.6 percent or 271.5 million which compares 15.2 percent of the weaker operators. Airtel’s handset bundle would aid in garnering a significantly higher share of the subscribers who are likely switch over the next 12-18 months.
Airtel’s current ARPU of Rs 154 for Q1 FY 2018 is unlikely to be dilutive because the 4G phone will be bringing a minimum ARPU of Rs 153 for the telecom operator.
“It is likely that the offer has an element of handset subsidy of around Rs 1,000 ie Rs 28 per month over the offer 36 months. This implies an effective ARPU of Rs 141 per month which is higher than Airtel’s current voice ARPU of Rs 111 per month,” Deutsche Bank Research said.
The bundle reflects Airtel’s stated belief that a degraded experience of data can significantly impact the value perception of 3G / 4G for a first-time data customer. This in turn would impede smartphone penetration and the transition to 4G. Hence Airtel has bundled an Android –based smartphone with a standard sized 4-inch touch screen. The Jiophone, in comparison is a 2.4-inch 4G feature-phone based on Firefox-OS.
Airtel is a likely gainer during the ongoing consolidation process. Reliance Communications, Tata Teleservices and Aircel could be on the block. Airtel could increase its revenue share by c400bps to 35 percent over the next 18 months. The revenue growth of Airtel would be driven by its acquisition of Telenor’s operations and potential subscriber gains from weaker players.
