Will Jio Bharat disrupt India's mobile market?

The launch of internet-enabled Jio Bharat phones at an "attractive pricing" will enable Jio to gain market share at the lower end segment and signals a reduced probability of tariff hike in the near term, brokerages tracking the sector said.

Jio on Monday launched internet-enabled Jio Bharat phones at Rs 999, packing in a cheaper monthly plan of Rs 123 for unlimited voice calls and 14 GB data.

The new offering aims to accelerate the '2G Mukt Bharat' vision, as India still has 250 million mobile subscribers trapped in the 2G era with feature phones.

In its note, JP Morgan said this "disruptive step" can halt incremental tariff increases for 2G and help Jio gain a share in that segment.

"We believe with this phone Jio can take market share at the lower end of the market.

"This also puts Bharti at risk as it can see increased churn from its recent 2G price action of increasing the Rs 99 plan to Rs 155 plan," it said.

Jio already had become aggressive at the premium end of subscribers in March 2023 through an aggressive postpaid plan launch, and the latest move showcases its aggressiveness towards the lower end of the subscriber spectrum as well, it noted.

"We believe this is negative for Bharti as any hopes of a tariff hike should be diluted over the next 12-18 months," JP Morgan added.

Emkay, in its note, said that JioBharat is better placed to disrupt the market as compared to the original JioPhone in 2018, "as it is a more focused product, has a simpler value proposition and has better distribution and production planning".

It believes Jio Bharat can transition over 100 million subscribers if there are no supply chain or product-performance hiccups.

"Vi (Vodafone Idea) and Airtel had 103 million/111 million 2G subscribers, respectively at Q4 FY23-end, and the shift of 40 per cent of 2G users to Jio Bharat may impact their India mobile revenue by 11 per cent/8 per cent, and impact mobile EBITDA by 19 per cent/11 per cent. It will impact Airtel's consolidated EBITDA by 6 per cent," Emkay pointed out.

The launch will delay the tariff hike discussion further, which will likely impact VIL more.

"We retain our long-term positive stance on RJio and Airtel," Emkay said.

According to Jefferies, while the move does not bode well for tariff hikes, it may consolidate the market into an effective duopoly sooner.

"The move could drive 20-22 million subscriber additions for Jio annually, resulting in a 2-3 per cent boost to its FY25 revenues/EBITDA, but may impact Bharti's FY25 revenue/EBITDA by 1-2 per cent," report by Jefferies said.

Citi, in its note on Jio's new phone launch, said the development could arguably signal a reduced probability of a tariff hike in the near term.

"The phone specs (like screen size, apps, etc.) are inferior to the JioPhone that was launched in 2017; the key attractiveness is likely to be the monthly plan of Rs 123 that offers unlimited voice," Citi said in its report.

However, it added, given the phone's Rs 999 upfront price tag, it may initially appeal only to those looking to buy a new feature phone and may not immediately disrupt Bharti and Voda Idea's 2G base.