Jio’s Disruptive Step: Internet-Enabled Jio Bharat Phones Aim to Gain Market Share and Reduce Probability of Tariff Hike”
In a significant move to accelerate India’s ‘2G Mukt Bharat’ vision, Jio has launched internet-enabled Jio Bharat phones at an attractive price point of Rs 999.
This strategic step by Jio has caught the attention of brokerages tracking the sector, as it has the potential to capture the lower end segment and reduce the likelihood of tariff hikes in the near future. With millions of mobile subscribers still using 2G feature phones, this disruptive offering could reshape the market dynamics.
Gaining Market Share at the Lower End:
According to experts at JP Morgan, Jio’s entry into the lower end market with the Jio Bharat phones can help the company gain market share. The aggressive pricing and bundled monthly plan of Rs 123 for unlimited voice calls and 14 GB data make it an attractive option for the price-sensitive segment. This move could pose a risk for Bharti as recent price actions in the 2G segment might lead to increased churn from its subscribers.
Transitioning India into a Duopoly:
Jefferies believes that Jio’s new offering could potentially consolidate the market into an effective duopoly sooner than expected. They estimate that Jio could add 20-22 million subscribers annually, boosting its revenues and EBITDA by 2-3% in FY25. On the other hand, Bharti’s FY25 revenue and EBITDA may be impacted by 1-2%. This shift in market dynamics could have a significant impact on the telecom industry in India.
Disruptive Potential of Jio Bharat:
Emkay highlights that Jio Bharat is better positioned to disrupt the market compared to the original JioPhone launched in 2018. The simplified value proposition, better distribution, and production planning make it a more focused product. Emkay believes that if Jio Bharat faces no supply chain or product-performance issues, it has the potential to transition over 100 million subscribers from Vi and Airtel’s 2G base. This could result in an 11% and 8% impact on their India mobile revenue, respectively.
Reduced Probability of Tariff Hike:
Citi’s analysis suggests that the launch of Jio Bharat phones signals a reduced probability of tariff hikes in the near term. While the phone’s specifications may be inferior to the JioPhone launched in 2017, the key attractiveness lies in the affordable monthly plan of Rs 123 offering unlimited voice calls. However, Citi points out that the initial appeal of the phone may be limited to those specifically seeking a new feature phone, thus not immediately disrupting Bharti and Vodafone Idea’s 2G customer base.
With a focus on capturing the lower end segment and transitioning subscribers from 2G to internet-enabled devices, Jio is disrupting the market dynamics.
As the telecom industry adapts to these changes, Jio’s aggressive approach positions it favourably in both the premium and lower-end segments, while Bharti and Vodafone Idea face potential challenges to retain their 2G subscriber base.
