India has a fast-growing base of 5G telecom users, with both Bharti Airtel and Reliance Jio rapidly rolling out their 5G network in newer cities and towns taking the total 5G user base to over 50 million subscribers. Yet, almost 250 million people, especially at the bottom of the pyramid, are still using basic mobile phones on 2G networks.
Reliance Jio's new entry-level 4G mobile phone platform 'Jio Bharat' has the potential to disrupt this segment and help the company, which is already the market leader in India's telecom industry, gain a further lead over rivals Bharti Airtel and Vodafone Idea, say, analysts.
Priced at Rs 999, the Jio Bharat phone is the most affordable 4G internet-enabled feature phone in the country. Not only is the phone affordable, but the service charges are also at a 20-30 per cent discount. For Rs 123, Jio Bharat phone users will get unlimited voice calls and 14GB of data for 28 days. Currently, users on other networks typically pay Rs 179 for 28 days, for unlimited calls and 2GB of data. Beta trial for the first one million Jio Bharat phones is to begin on July 7.
"The move could drive 20-22 million subscriber additions for Jio annually resulting in a 2-3 per cent boost to its FY25 revenues/ EBITDA (earnings before interest, taxes, depreciation and amortization)," said Jefferies analysts Akshat Agarwal and Ankur Pant.
Airtel currently dominates the 2G market 54 per cent subscriber market share and therefore could see a higher impact, according to the analysts.
"Assuming its subscriber churn is in line with its current market share, Bharti may lose 11 million subscribers a year, which may impact its India/ consolidated revenues by 1-2 per cent and India/ consol EBITDA by 1.5-2.5 per cent," said Agarwal and Pant.
JP Morgan analysts Ankur Rudra and Bhavik Mehta also feel the Jio Bharat launch could disrupt the 2G market and help Jio gain shares post the fading success of Jiophone devices.
"Bharti recently raised 2G prices from Rs 99 to Rs 155 across all circles while Vi (Vodafone Idea) took this in one circle. This disruptive step can halt incremental tariff increases for 2G and help Jio gain share in that segment," said the analysts.
Jio has already become aggressive at the premium end through aggressive postpaid plan launch and Jio Bharat showcases its aggressiveness towards the lower end of the subscriber spectrum as well, added Rudra and Mehta.
Jio Bharat phone comes bundled with Jio Apps such as JioCinema for video streaming, JioSaavn for audio streaming and JioPay for digital payments, and could help Reliance attract more viewership for streaming IPL tournament, noted Aditya Bansal and Anil Sharma of Kotak Institutional Equities.
However, given that people will have to buy an additional mobile device, existing users may not necessarily shift quickly, they feel.
"Jio Bharat bundles Jio’s entertainment apps and provides higher data allowances (versus incumbents’ current plans), but we believe additional upfront device cost would restrict the uptake to new feature phone buyers rather than existing feature phone subs of incumbents (would take 500-874 days to recover device cost)," the Kotak analysts said.
Morgan Stanley's Gaurav Rateria and Sulabh Govila also believe the adoption of Jio Bharat phones could take time, even though price points are competitive.
"While price points are competitive, given a break-even period of over 15 months for a new user, we do not view this as immediately disruptive for Bharti, but would be watchful," the analysts said.
