Jio's New Launch Could Disrupt the 2G Market

Jio's new launch increases competitive intensity but the impact is limited, Goldman Sachs has said in a report.

"We believe Jio's new product launch (announced 3rd July post market) should help it garner incremental wireless subscribers, which we would view as a positive catalyst for the RIL stock. However, with the industry feature phone base continuing to decline (50-60 mn total shipments in FY23), we see the potential revenue impact, while positive for Jio and negative for Bharti, as likely to be limited," Goldman Sachs said.

Jio announced the launch of a new entry level 4G feature phone, the JioBharat (JB) phone in addition to new entry priced unlimited plans. This opens a segment below Jio phones, priced at Rs 999 (below most 2G feature-phones). The new plan for JB phones offers unlimited voice calls and 14GB data at Rs 123 per month, lower than Bharti's and IDEA's unlimited plans at Rs 179 per month. JB phones run on a RTOS developed by Jio and manufactured by Karbonn in addition to other OEMs.

JP Morgan said in a report that this could disrupt the 2G market and help Jio gain share post fading success of Jio phone devices. Bharti recently raised 2G prices from Rs 99 to Rs 155 across all circles while Vi took this in one circle.

This disruptive step can halt incremental tariff increases for 2G and help JIO gain share in that segment, the report said.

Jio already had become aggressive at the premium end in March'23 through aggressive postpaid plans in addition to fiber pricing. We think this is negative for both Bharti and IDEA given returning disruption and tariff aggression at the bottom of the pyramid and signals lack of support for 4G tariff actions, it added.

Reliance Jio is launching an entry-level phone with more aggressive plans vs. the competition to attract feature phone users. While the price point is competitive, given a break-even period of over 15 months for a new user, we do not view this as immediately disruptive for Bharti but would be watchful, Morgan Stanley said in a note.