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Thursday 12 October 2017

Airtel Takes on Jio with 4G Smartphone

Telco partnering with handset makers to offer 4G phones at featurephone rates as fight for consumer share intensifies

New Delhi: Bharti Airtel has taken the fight for consumer share directly to Reliance Jio by launching a 4G smartphone at an effective price of ₹ 1,399, lower than Jio Phone’s offer of ₹ 1,500. Intense competition between telcos has resulted in a bonanza for consumers who will now be spoilt for choice as both carriers offer low-cost phones bundled with unlimited voice and free data every day.
The country’s No 1 carrier has begun partnering with handset makers to offer 4G smartphones at never before prices — nearly the same as featurephones — under its ‘Mera Pehla 4G Smartphone’ initiative, the first of which was announced on Tuesday giving cashback of ₹ 1,500 over three years.
“As the market leader and pioneer of 4G services in India, Airtel’s aspiration is to digitally empower every Indian with high speed data access,” said Raj Pudipeddi, chief marketing officer at Bharti Airtel. “We plan to partner with multiple manufacturers to bring affordable smartphone options to the market and build an ‘open ecosystem’ of low cost devices,” he added.
ET first reported on the partnerships in its August 22 edition.
After having cornered more than 300 million internet users in India, mobile phone operators including Reliance Jio, Airtel, Vodafone and others are shifting focus to the nearly 500 million featurephone users who are yet to upgrade to smartphones for want of affordability or lack of use cases. Each of the carriers is adopting separate strategies as they step up efforts to prevent their customers from switching to Reliance Jio.
Analysts were divided on whether Airtel’s present and future partners- hips can compete with Jio, with some saying that despite cash backs, featurephone users may not sway to the smartphone due to its high upfront payment of ₹ 2,899, refundable in parts. Another issue highlighted was lack of free content in the Airtel scheme, compared to Jio which offered live TV, movies and music.
“This will not get featurephone buyers to migrate to smartphones… it might appeal to current 3G smartphone users,” said Navkender Singh, senior analyst at International Data Corporation India. “I feel there will be limited takers at ₹ 169 per month commitment, it is too high,” he said.
Analysts at brokerage house Credit Suisse seconded the view that the Airtel’s move was unlikely to impact the Jio Phone offer where consumers only need to shell out ₹ 1,500 upfront. “The upfront fee for Airtel is nearly 2x that for Jio — this is likely the most important factor in the customer’s mind while choosing the phone,” they said in a note to clients on Tuesday, seen by ET.
It also warned of further pressure on average revenue per user (ARPU) of Airtel, as the service cost net of refunds works out to nearly ₹ 140 over a month, for the customer. “Tariff actions in the last 12 months have shown that meaningful ARPU compression ensues as higher ARPU subs downgrade to these plans which offer more value.”
Some, said that Airtel’s move would propel movement of featurephone users to smartphones, which has been stagnant for several quarters. If Airtel were to offer upgrade to the next smartphone in a year or so, through the partnerships, it could have a winner deal on its hands as it would improve customer stickiness while giving variety to users, besides differentiating from competition.
Most analysts cautioned that Airtel and its partner brands should ensure high volumes of devices, considering that Jio Phone clocked 6 million bookings within days of launch, else the move could end up being a counter to Jio, ‘only on paper.’ Bharti Airtels’ scrip rose 5.04% to close at ₹ 403.4 on the BSE on Tuesday.

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