Bharti Airtel has started work to counter its arch-rival Reliance Jio’s affordable smartphone, JioPhone Next, which has been postponed to November. The Sunil Mittal-led telecom operator is reportedly planning to launch co-branded smartphones in partnerships with domestic handset companies along with bundled data and voice offers to ringfence its 2G feature phone users.
Airtel has already made it clear that it will avoid the handset subsidy route to entice new and existing users to migrate from their feature phones to smartphones. It may look at aggressive bundling of voice and data offers along with various payment options to bring down the effective price of its smartphones.
Airtel chief executive officer, Gopal Vittal, recently said that he doesn’t believe that the handset subsidy route is the right one, adding that Airtel has clarity on how to deal with JioPhone Next. “…having said that it is a competitive industry, we will look at what happens in the marketplace through a combination of good marketing optics and capability and platforms around locks,” Vittal had earlier this month.
This contrasts with Jio’s strategy, which is expected to heavily subsidize the phone to quickly sweeten the offering to poach users from rival telecom operators.
According to a report by the Economic Times, Airtel had floated requests for proposals (RFPs) for affordable smartphones in the entry-level segment and domestic companies like Lava and Karbonn participated along with Nokia-branded phone maker HMD Global.
The report said that these brands are ready with possible devices and specifications, which Airtel could co-brand and launch in the market to counter JioPhone Next around November.
The Sunil Mittal-led telecom operator has around 120 million 2G subscribers. The report said that Jio would look to poach these users through the JioPhone Next 4G smartphone. Jio will be more focused on poaching users from struggling telecom operators, Vodafone Idea and BSNL.
“Airtel’s device offering is ready but the question is subsidy and if they would be able to match Jio’s offering. Airtel has sorted specifications but it will be difficult to match the pricing with a subsidy for them…but it will come up with an offering,” a person was quoted as saying by the publication. The person said that Airtel is currently monitoring the situation and will only come up with its counter offering after Jio’s launch around November.
It is important to note that Jio has delayed the launch of its smartphone due to the chipset shortage and rising prices of other components which means the Mukesh Ambani-led telecom operator will have to rework its subsidy strategy. The company is expected to price JioPhone Next in the Rs3,500-Rs4,000 ($47-54) range.
Jio is targeting a “large addressable market” of around 540 million, including 2G featurephone users, its own JioPhone users, and smartphone users with devices priced under $100 branded JioPhone Next, brokerage Jefferies said in a note.
“…smartphone users with devices priced above US$100 are unlikely to opt for a sub-US$ 100 device. That leaves 25% of smartphone users, i.e. 105 million smartphones, 115 million JioPhone users and 320 million feature phone users as the addressable market for JioPhone Next. Assuming replacement cycle of two years for smartphones and three years for JioPhone/feature phones, the addressable market for JioPhone Next could be 200 million devices annually,” Jefferies said.
As per the report, Airtel may relaunch its “mera pehle smartphone (my first smartphone)” initiative it had tied up with various handset brands to launch entry-level phones with various offers.
“Airtel will try to capitalise on the buzz in the market created by Jio to migrate its feature phone users to 4G network with its partner smartphone brands,” the report added.
In a note on Monday, Brokerage Edelweiss said that Jio is expected to launch aggressive bundled plans with JioPhone Next, which will impact Vodafone Idea more.
“Strong demand for JioPhone Next can potentially further weaken Vodafone idea’s finances. That said, we note consumers may not prefer a low-cost smartphone if experience is suboptimal; hence JioPhone Next’s success is not given…Considering high operating leverage, a 10% decline in VI’s revenue can shave off its cash EBITDA by 35%. On top of it, should RJio devise aggressive plans, VI’s subscriber acquisition costs may go up, further impacting EBITDA,” Edelweiss said in a note.