Reliance Industries (RIL) held its 44th annual general meeting (AGM) on June 24, 2021, where Chairman Mukesh Ambani updated the shareholders and media on the company's progress and its future plans. RIL's telecom arm Reliance Jio has already disrupted the sector by democratizing 4G voice and data offerings, which are the cheapest across the globe. The launch of JioPhone in 2017 at an “effectively free” price proved successful in helping unconnected users experience internet for the first time. After selling over 110 million JioPhones, Jio has now announced the JioPhone Next 4G smartphone.

The JioPhone Next is a result of the strategic partnership between Google and Reliance Jio that was announced at the 43rd AGM last year. Google has invested $4.5 billion for a 7.7% stake in Jio Platforms. The partnership aims to democratize smartphones to offer the most affordable Android smartphone with optimized OS and Jio experiences.

Source: Reliance Jio

JioPhone Next Designed for the Next Half Billion

While Jio did not reveal the specifications and pricing of the JioPhone Next, it did reveal that the smartphone will be available starting September 10. Jio also revealed that the smartphone runs on an optimized version of Android, with support for latest Android software and security updates. Ambani also highlighted that besides being ultra-affordable, the phone will include some cutting-edge features, such as:

• A voice assistant to check the latest weather updates, prepaid balance on My Jio, and cricket scores. It will also play music on JioSaavn.
• Translation of on-screen text into the user’s language and read-aloud features across the OS – web pages, apps, messages, and more.
• Smart camera with HDR and low-light night modes, and built-in Snapchat lens filters for selfies.
• Google Play Store for accessing apps and games, along with Google Play Protect built in for security.

The cheapest Android smartphone, Itel A23, sold by Reliance Jio is priced at INR 3,799 (around $51). If Jio and Google plan to subsidize the JioPhone Next, it could be available for well under $50, making it a killer deal. But we will have to wait till Jio officially announces the pricing in the next few months.

Opportunity for Reliance Jio’s Ultra-affordable 4G Smartphone

Reliance Jio now has over 425 million subscribers and is the first telecom operator from a country outside China to achieve this milestone. Jio looks to accelerate its growth by adding millions of more users in coming years, considering India is still one of the most under-penetrated smartphone markets in the world.

India’s population stands close to 1.39 billion, which has around 850 million unique mobile phone users at 61% mobile phone penetration. This leaves around 540 million of unconnected users who do not own a mobile phone yet. This unconnected segment mainly includes children, elderly people, and the ones below the poverty line.

According to our estimates, out of the 850 million unique mobile phone users, nearly 530 million are smartphone users, whereas roughly 320 million are feature phone users. With JioPhone Next, Reliance Jio is staring at a potential 520 million users. These include around 150 million unconnected, 50 million second hand/older used smartphone users due for upgrade and the 320 million feature phone users (including 4G Jio Phone smart feature phone users).

The 60-65 million active 4G Jio Phone (smart feature phone) users are probably the lowest hanging opportunity for Jio to upgrade them to Jio Next and boost ARPU and services usage. Simultaneously,  the 2G feature phone users from Airtel and Vodafone Idea will be an important segment to target aggressively with this new ultra-affordable smartphone from Jio.

Jio Needs to Broaden Value Proposition for Jio Phone Next

In the new normal of work and learn from home, a smartphone holds more importance in a mobile-first country like India. Reliance Jio will look to first attract millions of feature phone users to its 4G network via the JioPhone Next and then some portion of the next half a billion population which is yet to buy its first mobile phone. Further, the COVID-19 pandemic is likely to have disproportionately impacted the livelihood of people at the bottom of the pyramid and Jio will need to present a very attractive value proposition to help these potential 4G smartphone users "cross the chasm".

When Jio introduced the JioPhone in 2017, it was priced at INR 1,500, roughly $20. This acted more as a refundable security deposit, where after completing three years of usage, users could return the JioPhone and get a refund of INR 1,500. Considering this three-year contract expiry is nearing for most users, offering attractive upgrade deals would be a good way to ensure users remain “locked in” the Reliance Jio network and ecosystem.

Further, we could expect a "direct subsidy" as well as a "reverse subsidy" from Google and Jio respectively to make the device more affordable and price points closer to the earlier Jio Phone. EMIs, buybacks and cashback offers should also help broaden the value proposition.

Overall, Google and Jio's partnership for JioPhone Next should help both companies to reach more users. For Google, it is a way to attract millions of users to the Android ecosystem and boost its existing global base of 3.1 billion users closer to 4 billion users in the near- to mid-term. But the real test will be to see the kind of Android experience this smartphone can offer at much lower price points. Google had earlier failed with its Android Go and Android One programs but with Jio it could be different as the suite of services and optimization actually is designed to bridge the digital divide. If this works, the next goal would be to scale this offering across other under-penetrated emerging markets.