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telecom | IST

Jiophone Next: Experts say pricing competitive but not aggressive

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Jiophone Next t will certainly sell and it will cannibalise some of the other segments like the refurbished market or even Rs 5000-8000 market, said Navkendar Singh, Research Director, IDC India.

The much-awaited Jiophone next, the 4G smartphone jointly developed by Jio and Google, will be available in stores from Diwali and will be priced at Rs 6499. The device will also be available for an upfront payment of Rs 1,999 and the rest to be paid via easy monthly installments over 18 or 24 months. There is also a processing fee of Rs 501.
The company said a unique financing option like this is being introduced for the first time for a device in this category, making it accessible for a much wider set of consumers. To discuss the pricing, ARPU, subscriber addition etc., CNBC-TV18 spoke to Navkendar Singh, Research Director, IDC India, and Amnish Aggarwal, Head-Research, Prabhudas Lilladher
Aggarwal said when Jio entered the telecom space, the pricing was very aggressive in the beginning but now they have sufficient scale with them and so at this point of time, it will make more sense for them to not go for very aggressive pricing.
Singh said according to some of the equity analysts the pricing is competitive. But the objective is for us to get as many new smartphone users, which subsequently use data and then use their services and that is where the Jio platform and everything come in. Now we have about 35 to 40 crore feature phone users in India and that's the objective primary objective of launching this Jiophone at this price.
“Our view is it will not meet that objective but it will certainly sell and it will cannibalise some of the other segments like the refurbished market or even Rs 5000-8000 market because many people are forced to buy that because there's not a good choice below Rs 5000. Below 5000 is only less than 5 percent of India's market and because many consumers are not able to make a switch from Rs1000-1500 phones to Rs 5000 smartphones. And that is why brands also don't play there. So pricing is very competitive in that sense, but not very aggressive to actually appeal to the 40 crore user base of feature phones, which can really come – that is the organic growth which Jio and other telcos are supposed to get,” said Singh.
When asked if the Rs 5000 or 8000 smartphone category, which could be interested in Jiophone Next then how big is that market? What is the size and how competitive is it? How much headway can Jiophone Next with its features make? Singh said less than Rs 5000 phone is about 3- 4 of the market and it's growing much lesser than what the market is growing. However, Rs 5000 to Rs 20,000 phones is about 85 percent of the market, and Rs 5000 to 10,000 is about 20 to 25 percent of the market. While we don't have many options in Rs 9000 to 10,006 and so it is really Rs 5000 to 9000 and those are the consumers, you know, to which this will, this will appeal a lot because many of the consumers are taking already taking EMI schemes or some other financing schemes and buying that and setting the budget to do that.
Considering the quality of the phone - and if the hardware and software experience is at par with the normal Android, I think this will appeal a lot. So to that extent, there might be some impact on the brands which played there, said Singh.
Moreover, there is headroom for growth there because many of the people are going to the refurbished market also. In the past year, not everybody can afford a laptop or a tablet for their kids’ education and so many of the people are buying second phones on the refurbished market, said Singh adding that those consumers this will help and that's why the refurbished market will be impacted, the phone that is within Rs 4000-7000 and Rs 5000 to 8000 new smartphone consumers it will impact and that is a significant churn of the market.
“So it will not do 200 million - 300 million because that is the objective but it will still do volumes and obviously most of the players have a supply problem right now. So we'll see how it pans over the next six months, said Singh.
According to Aggarwal, Jio is already among the top two players in the market and he does not think that from now on it will purely be an attempt to increase the subscribers, but it will more at bringing new people into the fold who use the smartphones, and who can actually integrate with all their platforms as well as the apps which Reliance Group has got to generate more income of a business for them.
So to that extent, it is not only the number of subscribers but it is aimed more at improving the quality and the offering with these subscribers will use over a period of time, he further said.
Considering the minimum monthly EMI plans starts at Rs 300 for this particular smartphone - what would be the estimated ARPUs for Jio and how it would change post this launch and at this pricing, Aggarwal said it not going to dramatically increase volumes, but because more and more people will be able to migrate into a more affordable kind of a small phone, it will help the e-commerce business. As far as ARPUs are concerned we have some of the lowest costs of voice and data in the world and the ARPUs can only increase from here.
More importantly, the consumers will take these phones once they get into a habit of paying say Rs 300 per month as EMI then over a period of time, the scope for companies to actually increase ARPUs also improves with this, he said.
For the full discussion, watch the video
Disclosure: RIL, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.