The launch of the much-awaited 4G VoLTE feature phone from Reliance Jio will sound the death knell of 2G phones and the worst impacted would be the domestic manufacturers like Micromax, Lava, etc, which derive 50% of their volumes from such phones. To be sure, even South Korean major Samsung would be affected as it currently has the largest market share of 27% in the feature phone segment, but then it is also the market leader in smartphones. The option for some of the domestic feature phone manufacturers could be to become contract manufacturers for Jio, but then their margins would come under pressure. The JioPhone reportedly would be manufactured by Intex, but Jio would be the vendor. No other 4G VoLTE-capable feature phone will be able to work on the Rs 153 plan that Jio is offering. Anyway, for any other feature phone manufacturer to remain relevant, the phone will have to be cheaper than Rs 1,500, offer at least some access to video and a colour screen and be 4G-compatible. As per IDC data, 136 million feature phones were shipped last year.
At the moment, there are 2G feature phones with colour screens from obscure brands at around Rs 800, but they won’t work on 4G and can’t offer a decent data experience. Lava launched a 4G feature phone a few months ago, but that cost Rs 3,333. So to make a 4G feature phone relevant in the JioPhone world, someone will have to subsidise — either the service provider or the manufacturer. If Jio is able to offer a better device experience and stable data to sustain it, then we could be looking at a virtual monopoly over the feature phone market in a few months.
Reliance Industries chairman Mukesh Ambani said the phone has been envisioned and created by young Indian engineers and will be fully made in India by end of the year. Ambani has set his team a target of supplying 5 million devices a week from September and by end of the year production will shift to India. What JioPhone really brings to the table is a larger screen that makes it easier for users to consume video. Since JioMovie and other such apps will be preloaded, the phone could trigger a spurt in video consumption in a segment which had no access to this type of content so far. While consumers will gain from the new device and tariff packs, the JioPhone is not good news for service providers and other manufacturers. Service providers will need to come up with more compelling plans to keep their customers, at least those who are not really keen on the video bit.