Why JioPhone may struggle to find buyers in India?

JioPhone comparison

JP Morgan has listed several reasons why JioPhone, the budget VoLTE phone from Reliance Jio, may struggle to find buyers in India.

It may not be realistic to expect mobile consumers to use single-SIM phones locked-in for three years because multi-simming is 1.6-1.7x (SIMS to handset ratio) and pre-paid monthly churn is >5 percent in India.

If the consumer can afford to pay at least Rs 153 per month for three years towards the JioPhone ARPU, she will become a smartphone user before the end of the 3-year contract. Is JioPhone largely an up-trade proposition for the low-end ARPU sub segments or can it do enough to encourage consumers to downtrade as well?

“The answer to this would really depend on whether consumers are content enough with the experience / performance of the JioPhone and find compromises in downtrade acceptable. Then, there is also the matter of finding the trade-off between following a relatively walled ecosystem vs an open ecosystem,” said JP Morgan.

Rival telecoms will be partnering OEMs to bring their own versions of the VoLTE feature phone after they achieve a threshold VoLTE network up and running. In this case, Reliance Jio will have a head-start of 9-12 months.

# Is the JioPhone enticing enough to attract equivalent / higher-ARPU subs from rival telecoms?

# Can the Rs153 monthly ARPU plan do this?

# Will consumers buy JioPhone with screen of 2.4” against entry-level smartphones’ 4”+?

# Phone performance, touchscreen, battery life, form factor, quality of video / images will determine the buying decision

# Consumers may not trade down for just incremental cost benefit to embrace the JioPhone

Smartphone penetration for Bharti Airtel / Idea Cellular has crossed 40 percent of their sub-base even as a significant  percent of them are not broadband (3G/4G) subs yet. In this case, will JioPhone work wonders for Reliance Jio?

The low-end of this smartphone-sub base operates at sub-Rs 200 ARPU in India. Idea Cellular will have an ARPU of Rs 158. Consumers here will likely consider the pros and cons of downtrading to JioPhone from a smartphone they own now or intend to own in the future.

How willing would a sub-Rs200 ARPU (non-smartphone) sub be to stay anchored to a 4G feature phone and not gravitate towards a smartphone?

Single-SIM and lock-in for three years can be deterrents to broad-based adoption.

85 percent+ of the incremental 4G smartphone models shipped have multi-SIMs. Most feature-phones in the budget category are single-SIM phones.

At the entry-level, 75 percent of smartphones (<Rs3,500) are multi-SIM with screen size almost wholly in the 4-4.5 inch range. 80 percent+ of the feature phones priced below Rs 2,000 are single-simmed devices.

JioPhone comes pre-loaded with RJio’s apps such as digital payments, social media platforms, messaging, content/entertainment etc. Will JioPhone embrace open and popular apps such as WhatsApp, Paytm, etc. This will violate net neutrality concept.

News reports suggest that the OS used may be KaiOS, which is a forked version of Firefox. KaiOS is less-used OS but is still recent built specifically for the user segment that cannot afford smartphones. Alcatel Go Flip phone uses this OS.

There may not be massive leapfrogging in ARPUs to use VoLTE phones from Jio. “We do not consider the Rs70 ARPU subscriber as likely to migrate – we see migration happening more at the premium feature phone segment with ARPU >Rs100,” JP Morgan said.

JP Morgan estimates that ~40 percent of industry revenues come from feature phone users; within this, about 35 percent revenue contribution from higher-end users (>Rs100 ARPU) — assuming 25 percent of this high-end featurephone segment migrates within 12-18 months of the launch at average ARPU uptrading of 23 percent.

This represents additional industry revenue of ~0.8 percent, according to Viju K George of JP Morgan India. Even one percent increase in revenue is good for Jio during this hyper competitive market scenario.