As per Bharti, the learning from other geographies suggests that the consumers have shown a high propensity to switch service providers as subsidies are phased out eventually.
Reliance Jio’s low-cost smartphone, which it is developing in partnership with Google, might be delayed to a Diwali launch, but will definitely hit the markets this year. However, rival Bharti Airtel continues to stoutly resist any temptation of getting into a subsidy-led handset business.
At a recent analyst conference, Bharti Airtel’s chairman Sunil Bharti Mittal once again stated that telecom operators may not be able to sustain a handset subsidy-driven subscriber addition model in the long run and, therefore, the company is not keen to move in that direction.
As per Bharti, the learning from other geographies suggests that the consumers have shown a high propensity to switch service providers as subsidies are phased out eventually. Moreover, entry-level smartphones have the lowest market share, as consumers tend to upgrade to better quality devices.
Hence, Bharti is working on other options to enhance its competitive positioning when required, such as platforms around locks, lending options with locked devices, and pilots with large suppliers.
For instance, analysts say the company could enter into negotiations with a clutch of device makers to manufacture 4G phones, but instead of offering any direct subsidy to consumers, as Jio does with its upgraded feature phone, JioPhone, it may partner with the OEMs. This could be in a manner that subscribers who buy these phones get some cashback incentive, which will effectively reduce the price of the phones.
Just why a low-cost smartphone is attractive for companies is that the country still has some 300 million 2G subscribers who use feature phones. Migrating this population to the 4G networks would yield higher average revenue per user (Arpu) to telecom operators. Reliance Industries’ chairman and managing director Mukesh Ambani, speaking at the company’s annual general meeting in June, where he had announced plans of launching a low-cost smartphone, had stated that his company’s goal is to make India ‘2G-mukt’ and ‘5G-yukt’.
Welcoming Jio’s plan to launch such a phone, Bharti Airtel had said that an affordable smartphone would create a better ecosystem and help competitors too. However, the company added a proviso. “Airtel welcomes the low-end smartphone initiative from Reliance Jio and Google. We support every effort that triggers the upgrade of feature phones to smartphones so as to bring more Indians online,” a Bharti Airtel spokesperson had told FE. “Our experience has shown that as customers with entry-level devices upgrade to quality smartphones priced over Rs 7,000, they demonstrate a strong preference for Airtel’s brand and network,” the spokesperson had added.