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Jio Phone's 3-Year Lock-In Period, Monthly Plan Cost, May Be Obstacles in Adoption: JP Morgan

Jio Phone's 3-Year Lock-In Period, Monthly Plan Cost, May Be Obstacles in Adoption: JP Morgan
  • JioPhone is can be bought with a three-year lock-in period
  • JP Morgan report feels that this could be an obstacle
  • Users in India prefer multi-SIM devices and the prepaid churn is >5%

At its Annual General Meeting this year, Reliance Jio announced its first 'effectively free' 4G phone - the JioPhone. The catch is to get a JioPhone, users will have to pay a deposit of Rs. 1,500 upfront, refundable after three years. Now, weeks after the launch, a fresh report questions the JioPhone's feasibility in the growing Indian market, specifically, the growing smartphone market. Jio is asking for a three-year lock in period for the JioPhone, only after which the refund will be generated, and this, along with the pricing of the monthly plan rentals, may be obstacles in the JioPhone's adoption, claims a recent JP Morgan report.

The JP Morgan report shows apprehension in the success of the JioPhone. The report claims that the Indian audience is more accustomed to multi-SIM devices, and the prepaid monthly churn is less than 5 percent. Keeping this in mind, it would be unrealistic to expect users to get locked into three years for a single-SIM variant that works only with Jio network and SIM.

Furthermore, some usage plans are priced at Rs. 153 for a month. A user who can afford Rs. 153 a month is normally considered well enough off to already be a smartphone user, or become one before the three-year run is over, according to the report. The report notes 40 percent smartphone penetration for the largest telecom operators, such as Airtel and Idea, to be another factor highlight the trend towards smartphone migration in the market. This, coupled with the lack of a massive ecosystem like Android (and apps like WhatsApp), would limit the perceived smartness of the JioPhone, which is being marketed as "India ka Smartphone". Finally, the report notes that Reliance Jio may be catering to the feature-phone segment instead of the entry-level smartphone segment it pitched at the AGM.

"Is JioPhone largely an up-trade proposition for the low-end ARPU sub segments or can it also do enough to persuade consumers to downtrade as well? - In our view, 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 (which no doubt helps propagate RJio's family of proprietary apps) vs. an open ecosystem," JP Morgan further countered in its report, obtained by Telecom Talk.

Also, telcos like Airtel, Vodafone, and Idea will come up with their own 4G VoLTE feature phone offerings to counter the JioPhone, but it still gives Mukesh Ambani a head-start of 9 to 12 months. These telcos will only launch counter products after they manage to get a threshold VoLTE network up and running.

"We think the stakes could actually be higher for the OEMs (that are not engaged with RJio), who would not want to left out of this new phone segment as their existing bread-and-butter feature phone business comes under threat. So, incumbents may be actually able to exercise leverage over the OEMs in the coming months," JP Morgan said in its report.

In any case, the Jio Phone booking process will start from August 24, both online and offline, and here's all that you need to know if you're looking to get one for yourself.


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