Reliance Industries’ smartphone experiment, JioPhone Next, is finally here after a hiccup or two. But can it help Reliance Jio fulfil its ambitions of a “2G-Mukt Bharat” (2G-free India)?

In today’s Finshots, we explore this and more.


The Story

In case you missed the news, last week, Reliance announced their new Android-based smartphone in collaboration with Google. Priced at Rs 6,499, Reliance is attempting to put a smartphone in the hands of every Indian.

But why is Reliance getting into the smartphone business, you ask? Especially with Google as a partner?

Well, to understand that, we need to go back in time. In 2016, Reliance Jio had just blitzed the telecom market with its sharply low (practically free) tariffs — For voice and data. It was a disruptor. And within six months of its launch, India went from consuming 200 million GB of data a month to over 1 billion GB! Let’s call it the “Jio effect”.

But Jio also had another ace up its sleeve. In 2017, Jio launched the JioPhone in the sub-Rs, 2000 range. It was a 4G-capable feature phone that was packed with smart capabilities like access to Facebook, YouTube, and JioTV. Reliance then followed it up with a slightly more advanced feature phone in 2018 that was priced closer to Rs 3,000. With both phones, its target was to get 2G users to switch — since the company only had a 4G license. And they were hoping to get them to switch to Jio.

And it kind of worked. In 2017, there were about 500 million feature phone users in the country. By 2021, Jio got around 110 million of these users to sign up to its 4G network. Bundle cheap tariffs with a cheap phone, and you can get a bit of magic.

But Jio wants more. It wants everyone to switch and it wants them to switch to the 4G network. Hence, its slogan for a “2G-Mukt Bharat” (2G-free India)! And with JioPhone Next, it’s attempting to entice the 320 million users who’re currently on Airtel’s and Vi’s 2G networks to do just that.

But that isn’t going to be easy. Especially considering the price tag of Rs. 6,499. Granted, it’s probably a bargain when you consider it’s a smartphone, but 6,499 is no chump change.

And when you look at what happened with the first two versions of the JioPhone, you’ll begin seeing why this may be the case.

Research consultancy Counterpoint found that between 2018 and 2019, the JioPhone’s market share dropped from 47% to 28%. And that’s not because people weren’t buying feature phones. But cheaper phones from Samsung and Lava began hitting the market right about the same time.

JioPhone 2 didn’t fare well either. In 2019, out of the total JioPhone shipments, JioPhone 2 contributed less than 1% to sales. Perhaps the pricing had to do something with this as well. After all, the average rural Indian home has a monthly surplus of just about Rs 1,413. And if people weren’t fully buying into the idea back then, maybe this new phone will meet the same fate. But let’s suppose, it doesn’t. Let’s suppose people take to this smartphone like never before and join Reliance in echoing the mission statement of a “2G-mukt Bharat.”

How could all this play out for Reliance?

Well, for starters, there’s the obvious benefit of getting them on Jio’s 4G network. If more people get a Jio sim, that would create a steady stream of recurring revenue. So technically, adding more subscribers could breathe new life into the telecom business.

Then there’s Jio Mart — the e-commerce platform for groceries that Reliance launched in 2020. With a presence across 200 cities, the goal was to connect 3 crore Indian Kirana shops to their customers. And, as more users switch to Jio’s 4G ecosystem, JioMart could receive a fillip as well. In fact, Reliance also has plans to tap into the JioMart network to sell digital electronics, including the “Next” phone.

So yeah, time will tell if Jio’s target market will switch to a 6,500 smartphone. But for now, the company seems pretty bullish on the whole scheme.

Until then…

Don't forget to share this article on WhatsApp, LinkedIn and Twitter