Bharti Airtel is set to compete with Reliance Jio in the 4G smartphone market by introducing a cost effective phone at Rs 2,500 — during the upcoming festival season.

The above chart prepared by Goldman Sachs indicates the importance of 4G market for Indian telecom operators. Telecoms will be depending on 4G networks for 40-45 percent of the total revenues as against 20-25 percent from 3G and 35-40 percent from 2G networks.

“Though demand for utility smartphones remains strong, there is growing demand in emerging markets for 4G smartphones, with more storage, better processors and more advanced cameras. This is translating into higher demand for mid-priced smartphones at $150 to $200,” said Anshul Gupta, research director at Gartner.

Reliance Jio’s budget VoLTE phone will be available for a refundable price of Rs 1,500 to all 4G users across the country.

The strategy of Airtel is to tie up with Indian smartphone makers such as Karbonn or Lava and bring a out feature-rich Android smartphone for 4G customers. Airtel has 4G presence in all 22 circles. Airtel offers 2G, 3G and 4G services.

Airtel aims to offer the best mobile data packages along with the budget 4G smartphone that will have bigger screen as well for better viewing of video and images. This will be a big blow to Jio, the telecom venture from Reliance Industries (RIL). Reliance Jio is currently dominating the Indian 4G market after offering free voice and data services.

Reliance Jio’s low-cost VoLTE phone is targeting monthly ARPU of INR 153, 71 percent higher ARPU than the March 2017 national average of INR 89.3.
“Despite the launch of the VoLTE feature phone, we expect Jio’s subscriber market share is unlikely to cross 18-20 percent unless it drops tariffs further,” said Elara Securities earlier.

Telecom analysts’ reports suggest that the 3G ecosystem in India is set for a rapid decline with the launch of Jio. At present, almost 100 percent of smartphones now shipped in the country are 4G enabled. Since 4G speeds are ~10x higher better as compared with 3G, customers are increasingly likely to shift from 3G networks to 4G.
Airtel India CEO recently noted that the company’s investment strategy is aimed at ramping up 4G networks and shift away from 3G.

Idea Cellular, which will be merging with Vodafone, will also be targeting to launch 4G phones.

Goldman Sachs says revenue market share for smaller telecoms will decline to 11.5 percent by FY21 from 24.2 percent in FY17 because they focus on 2G or 3G networks.

“Any high-speed data network that smaller telecoms have is largely based on 3G technology, and with this accelerated shift towards 4G, market share for smaller telecoms is likely to come under even more pressure,” said Goldman Sachs.

Since Jio’s network is 4G only, rapid growth of 4G handset market is important for the success of the company.

About 20 percent of all mobile handsets in India support 4G as of June 2017. The 3G smartphone base of ~160 million will likely convert to 4G over the next 3 years with almost all new smartphones shipped in India now supporting 4G.

Baburajan K