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Why is Reliance Jio experimenting with device bundling when it’s proven to be not as effective?

The company is adopting an offline handset retail strategy despite it being a risky proposition.

Reliance Jio is offering its services through an array of devices in collaboration with offline retail stores in Delhi and Mumbai, according to a report in the Economic Times. Retailers informed ET that Reliance has installed “Jio Mini point” POS (Point of Sale) devices through which they can issue devices locked with Jio SIM cards.

ET said that it signals an adjustment in the Mukesh Ambani-led company’s handset retail strategy as it prepares for the launch of JioPhone Next. Only retailers with Mini POS devices will be able to offer phones locked with Jio which also carry discounts and other services. The report explains that Reliance’s retail strategy is to help the telco meet its target of 500 million users. It had 436.7 million users in June. 

Device bundling in India has always been a risky proposition.  Gopal Vittal, CEO, Bharti Airtel had said in an earnings call last year that the cost of distributing devices through a telco network is very high. He explained that the scheme never got off the ground because it was expensive on the telecom company’s bottom line and imposed a burden on the supply chain. He also revealed that telcos in other parts of the world were struggling to maintain margins while subsidising phones. It remains to be seen whether Jio is able to navigate the choppy waters of device bundling. 

Jio’s partnerships with other manufacturers

In addition to offline retailers, the telecom operator is offering smartphones locked with its SIM cards under its Jio exclusive programme. 

The company has entered into reverse handset bundling partnerships with Vivo, Xiaomi, Samsung, Oppo, HMD Global, and iTel, among others, according to ET Telecom. These smartphones will cost anywhere between Rs 10,000 – Rs 15,000. 

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Under the programme, smartphones can be bought with price support from Jio, along with no-cost EMIs up to 6 months and additional benefits worth Rs 7,000-Rs 10,000, depending upon the device.

What is JioPhone Next? 

Mukesh Ambani announced the launch of the JioPhone Next smartphone at the RIL AGM 2021 event this year. It was developed in a joint collaboration between Reliance Jio and Google. The handset will be on sale from September 10. 

ET said that the company will rely on the device bundling sales model for the launch of its affordable smartphone. The company claims that the smartphone’s affordability will convince millions of 2G mobile users to buy JioPhone Next as the upgrade costs are high at current smartphone prices. 

The handset is expected to be priced at Rs 3,500 and will be powered by a stripped-down version of Android called Android Go. 

“Our teams have optimized a version of our Android OS, especially for this device. It will offer language and translation features, a great camera, and support for the latest Android updates. It’s built for India and will open up new possibilities for millions of new users who will experience the Internet for the very first time,” Google CEO Sundar Pichai had said at the AGM.

What are Jio’s competitors up to? 

Airtel’s CEO Gopal Vittal, in a recent earnings call, disclosed that the company would try to compete in the handset market, but added that it did not want to get into having phones in its inventory. 

“We’re working with both OEM manufacturers, with Google, as well as with software developers to see how we play this game in the smartest way without taking inventory positions, without manufacturing our own device while still playing with the ecosystem at large. But yet being competitive, I’m not able to share a lot more texture and detail on this because some of this is still being worked through and it’s still unclear,” Vittal was quoted as saying. 

Vi, on the other hand, is focusing on raising funds from investors as it is under acute financial stress. It explained that the subscriber loss was due to the pandemic and the second wave. 

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“This is certainly a huge impact of the COVID second wave, as you would recall for the earlier quarters, we had reached a point of continued reduction when the subscriber losses to record that we had almost reached to a totally flat situation in Q4 of last year. So the second wave basically resulted in lots and lots of closures and lockdowns,” Vi managing director and CEO Ravinder Takkar said in an earnings call.

The financial stress is not limited to Vi alone as is evident from a recent missive by the Cellular Operators Association of India to the Union government. COAI said that a relief package in the form of a reduction in levies, an extension of tenure of spectrum lease, and easier payment terms to service debts would clear the way in making the telecom sector sustainable and financially viable

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