Financial services firm Credit Suisse said sales of Jiophone, which had begun to lose steam after an initial surge, are now back on track due to the affordable Rs 49 plan launched by Reliance Jio.
Jiophone, priced at Rs 1,500, is estimated to be selling at the rate of about 6 mln pieces per month, boosting Jio’s subscriber additions to 8 mln plus every month.
The boost is being attributed to a Rs 49 plan introduced by Reliance Jio in late January.
Under the plan — which is about 66% cheaper than those of its rivals — users can make unlimited voice calls as long as the SIM is inside a Jiophone. In comparison, unlimited calls are offered on plans starting from about Rs 150 per month by rivals such as Bharti Airtel, Idea Cellular and Vodafone.
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Jiophone was launched as an ultra-affordable quasi-smartphone that allowed its users to watch streaming videos and listen to music downloaded from the Internet.
However, given the candybar form-factor and the small display, its primary use has been as a voice-only device, especially in the hands of those who found full-screen, smartphone devices too complicated or fragile.
People who wanted to consume multimedia content seem to be going for affordable smartphones in the Rs 3,500 range instead of the Jiophone, priced at Rs 1,500.
When usage patterns suggested that people were looking at the phone primarily as a voice-only device, and not as an entertainment device, Reliance Jio responded by launching the Rs 49 plan tailored to voice users. This seems to have spurred flagging sales of the handset.
Sunil Tirumalai and Viral Shah, the analysts who wrote the Credit Suisse reports, confirmed that the plan was the primary driver behind the sales of the device.
“In our conversations with some of these stores prior to the introduction of Rs 49 plan (end-Jan-2018), we understood that supplies had been building up but demand had cooled off (after the initial frenzy post Aug-Sep-2017 launch of the product).
“The introduction of the Rs 49 JioPhone plan clearly marked uplift in the sales of the Jio feature phone across the stores we have been talking to. Importantly, the sales momentum has remained robust even two months after the introduction of the plan,” they said.
“This plan’s unlimited calling proposition appears to be a big draw,” they added.
The duo also dismissed the ‘hope’ held out by some in the industry that the new entrant into the telecom market was not serious about the long-term prospects of Jiophone.
As such, incumbent operators could see more and more pressure on their voice business, which continues to contribute about 60-70% of their profits.
“When the Rs49 plan was first announced by Jio, we came across market commentary (including from some of the incumbent operators) that the new discounted plan is just a temporary offer to ‘clear out’ the last remaining stock of an allegedly failed product.
“On the contrary, our discussions with various stores suggest that supplies have continued to pour in steadily every week since mid-December 2017. If the new plan was a ploy to clear up stuck inventory, such continuous stream of supplies should not have continued in the smaller towns,” they said.
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