Jio Phone: 'Free 4G Phone' Is on Its Way to India - With a Catch

In a move to corner India's vast, untapped smartphone market and elbow out foreign competitors, Mukesh Ambani, the country's richest man and the multibillionaire owner of Reliance Industries, recently announced that he will start handing out effectively free cellphones.

The catch is that the phones come bundled with a plan on Reliance's mobile network, Jio, which was rolled out across India in 2016 as an ultracheap alternative to the existing voice and data plans offered by rival providers. (To get a JioPhone, users will have to pay a deposit of $23 (Rs. 1,500) upfront, refundable after three years.)

Handing out "free" phones may seem an expensive way to lure subscribers, but the stakes are high. Cheap devices and low tariffs, coupled with better infrastructure - mobile towers and electricity even in remote villages - have boosted cellphone usage in India over the past two decades. As wireless subscriptions top 1 billion, up from just 1.89 million in 2000, a scramble is underway among telecom companies and smartphone manufacturers to capture every scrap of market share in the country.

"Twenty years ago, most business was still done on pen and paper," said Tarun Pathak, a technology analyst at Counterpoint Research. "Records were still not kept online. Even 10 years ago, the main communications were done through fax and post. We've now moved from that to WhatsApp and instant messaging. A lot of Indians entered the digital age through their smartphones."

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At the cutting edge of the shift is India's enormous millennial population, which increasingly relies on smartphones for education, work and social interactions. Shifa Dhorajiwala, a university student, says she uses her phone constantly.

"I'm hooked to Instagram and Snapchat," she said. "They are like an informative bulletin. Even if you don't read newspapers, you get updates on everything on Facebook and Instagram.

"I'm on my phone all the time, but no one finds it weird," she added. "Pretty much everyone else is also."

When Jio launched last year, it offered 4G data at rock-bottom prices, the cheapest in the world, according to Ambani, along with several freebies. The cheap data plans shook India's telecommunications industry. Within days, millions of people had signed up with the network. Crowds flocked to stores to secure the bargain deal and lined up for hours to get Jio SIM cards. Less than a year after its launch, Jio is estimated to have more than 100 million users.

Now, rival telecom giants are realigning for a showdown. On July 24, a proposed merger between two prominent networks, Vodafone and Idea Cellular, was approved, clearing a path for a coalition with the potential to take on Ambani's juggernaut.

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Caught in the middle of this battle between network behemoths are smartphone manufacturers. An impossibly cheap, even free smartphone from Reliance could rattle established players like Samsung, which holds 26 percent of the smartphone market share in India.

As markets in America, Europe and China reach saturation, smartphone sales have plateaued, turning the attention of international tech giants to India's newly affluent.

"Every global giant is now focusing on India," Pathak said. "The US, Europe and China are now mostly replacement markets, where people upgrade their phones every few years. In India, we still have first-time smartphone users coming on board. That's a huge opportunity for all the players to grow and coexist at the same time."

Growth will probably continue for at least four or five more years, he said.

Jio Phone to Slow Feature Phone to Smartphone Conversions: Counterpoint

For Apple, which has struggled to find a footing in the smartphone market here, even a heavily discounted iPhone 6 ($435 as compared to its Indian launch price of $802) is an increasingly tough sell as rival manufacturers slash prices. After a fumble trying to sell cheap refurbished phones in India, a proposal that the Indian government rejected, Apple announced this year that it will set up a factory in the southern city of Bengaluru, saving consumers steep import duties.

Chinese brands, too, are competing. In recent months, companies such as Xiaomi and Oppo have closed in on the established manufacturers' clientele, offering similar features without the high price tags.

For Indian brands such as Intex Technologies, which sell budget phones mostly in smaller cities and villages, the impact of Jio's launch was cataclysmic. Since March 2016, the company's market share has fallen from 11.5 percent to 6.5 percent. In less than a year it had to replace its entire inventory and is set to launch 4G-enabled smartphones in September.

"Jio has fast-tracked the 4G conversion, and the market has swiftly changed in less than a year," said Rajeev Jain, chief financial officer at Intex.

According to analysts, about half of India's mobile users use smartphones. The other half use feature phones, which allow users to call, text or use Internet browsers but have limited capacity for the installation of apps. "Now the game is to get those feature phone users who may want to convert to smartphones," Pathak said. "Jio already has over a 100 million users. Their next 100 million will come from the feature phone users."

Jain says that rather than taking away customers from rivals, Jio could expand smartphone companies' potential user base. Vibrancy in the economy, he said, means there's plenty of room for everyone.

"Indians now cannot imagine a minute without their mobile phones. What these Chinese brands and Jio are doing is expanding the market for us. They'll start with cheap Jio phones and eventually switch to phones with more features," he said.

Vikas Katyar, who sells flatbreads on a roadside in Noida, near Delhi, was among those who switched to Jio last year. A month after the network launched, he tossed out his old Nokia for a sparkling new 4G-enabled Vivo. "In the evenings, I run a business from my cellphone," he said. "I sell books online through Amazon. For that, my cellphone is very important."

Now, as he flips flatbreads, he contemplates switching to the Jio phone when it launches later this year. "If it's free, then why not?" he says.

© 2017 The Washington Post

The Jio Phone looks awesome but is there any catch? We discussed that on our weekly technology podcast Orbital, which you can subscribe to via Apple Podcasts or RSS or just listen to this episode by hitting the play button below.