Four years ago, disbelief rippled through the audience at Reliance’s annual general meeting when Mukesh Ambani said he was launching 4G Volte smartphones under Reliance’s own brand name Lyf at an unbeatable price of Rs 2,999 when the average 4G smartphone at that time cost Rs 4000.
On Tuesday, during the company’s first pandemic-forced virtual annual general meeting, Ambani outlined another vision to disrupt the mobile device market again.
The company, with its new partner Google, will build entry-level 4G and 5G smartphones at the fraction of the existing cost based on optimisations to the Android operating system and the Playstore.
If successful, the move could pose serious challenges to competing mobile companies, especially Vodafone-Idea. A large chunk of its customers are still on 2G and 3G. Bharti too will be affected, not to mention BSNL, which does even have a 4G service live, leave alone a phone.
In 2017, Jio entered the mobile device space by launching 4G feature phones bundled with data.
This was primarily to lower the bar for 2G customers who were reluctant to take the plunge and upgrade their phones from 2G to 4G by shelling out a good sum of money.
The phone was based on a non-Android platform — KaiOs — and lacked the ease of use and features of Google’s operating system. But the killer was the price: Rs 1,094 for both the phone and a data pack. The magic price worked. Jio grabbed over 100 million 2G subscribers from Vodafone-Idea and Bharti. The latter both failed to take on Jio with their own competing product.
Yet the growth of the feature phone subscriber base which contributed to more than 60 per cent of net incremental subscribers every month initially, fell to 40 per cent and then fell further to a trickle.
Analysts say that to woo the rest of the 2G and 3G customers still with Vodafone-Idea and Bharti — as well as provide an upgrade for their own 4G feature phone customers — Jio needed a new strategy.
The need of the hour was an entry-level 4G smartphone that cost less than the ones currently available for over Rs 3,000. (Slightly better quality ones go above Rs 5,000). If not costing less, it should offer more value.
That is the slot Ambani is eyeing.
So how will it hit the rivals? A slower pace of conversion of its customers to 4G for Bharti and Vodafone-Idea – and the disadvantages of a legacy network – have led to a situation where together they currently (based on March 31st subscriber figures) have over 333 million 2G and 3G customers who constitute over 58 per cent of their subscriber base. These subscribers are prime targets for an affordable 4G smartphone, even better if it is bundled with data. Unless, of course, the two companies aggressively move their customers to 4G very quickly in the next 6-10 months (the time it will require for such phones to be commercially available) or make a counteroffer.
Even BSNL/MTNL with over 150 million non-4G customers are vulnerable as their 4G services launch seems to have been delayed. Vodafone-Idea stands to be the worst-hit. It is already financially strapped. Over 64 per cent of its customers are on 2G and 3G, rendering them vulnerable to Ambani’s disruptive move.
This was clearly discernible when 4G feature phones were introduced; the loss of net customers each month was far higher for Vodafone-Idea than for Bharti which quickly upgraded and gained 4G customers. What isn’t known is whether Reliance and Google can build new entry-level smartphones at an affordable price. Or whether they can be sold in other emerging markets.