Mukesh Ambani's Reliance Jio created ripples in the telecom industry when it launched the first of its kind 4G feature phone in July 2017. What was a big draw was that it was effectively free; people just had to pay a Rs 1,500 security deposit, which was refundable if the user returned the phone after three years. Rival telecom operators were quick to launch aggressive voice and data plans to counter that.
Now, Bharti Airtel has gone a step ahead, partnering device maker Karbonn Mobiles to introduce an android powered smartphone at the price of a feature phone. It says this is “the first of several partnerships” planned to bring highly affordable 4G smartphones to the market.
The Karbonn A40 smartphone sells in the market for about Rs 3,499. Under the partnership between Airtel and Karbonn, the phone will be available at an effective price of Rs 1,399. The phone will be bundled with a monthly pack of Rs 169 from Airtel.
While, Jio Phone is essentially a feature phone that comes pre-installed with a suite of Jio apps, the Karbonn K40 is a 4 inch smartphone that runs on Android 7 operating system and has access to the Google Playstore, it also comes preloaded with Airtel apps.
“We are delighted to partner with Karbonn to remove barriers to smartphone adoption and enable millions of Indians to leapfrog to a full touchscreen smartphone experience,” said Raj Pudipeddi, director, consumer business and chief marketing officer at Bharti Airtel.
The statement seems to be clearly targeted at Jio. At Reliance's annual general meeting this year, the Jio phone was introduced as “India ka smartphone” and chairman Mukesh Ambani had said “Jio is reinventing the feature phone today with the Jio phone.”
Even as the smartphone market in India has grown rapidly, there are close to 50 crore feature phone subscribers in the country and it is this market that analysts had predicted will be the next big battleground. Analysts have said incumbent telecom operators and even handset makers will be forced to launch cheaper phones and bundled offers to counter, to take on Jio phone.
Reliance Jio's aggressive launch of its 4G Volte services in 2016 has hit incumbents including Airtel hard. Jio offers free voice calls and extremely cheap data prices. Rivals have followed suit to match the offers with new prepaid and postpaid plans.
However, that has come at the cost of earnings. Bharti Airtel's first quarter consolidated net profit plunged near 75 per cent year-on-year to Rs 367 crore, while revenue declined 14 per cent to Rs 21,958 crore. That has not deterred the company from aggressively pushing cheaper plans and devices and it is not going to stop at just one device.
Pudipeddi, further said, “We plan to partner with multiple manufacturers to bring affordable smartphone options to the market and build an open ecosystem of low-cost of devices.”
Analysts don't see the competitive intensity reducing anytime soon and expects telecom operators' financial health to worsen further.
ICICI Securities expects Airtel's July-September quarter earnings before interest, taxes, depreciation and amortization (EBITDA) to decline 21 per cent year-on-year, while revenue is likely to decline 12 per cent.
Meanwhile, Bharti Airtel shares closed up 5 per cent on Oct 11 at Rs 403.40, partly on the partnership announcement with Karbonn, which could increase its subscriber base. But, shares also rose on report that a consortium-led by buyout fund KKR was in talks to acquire Airtel's telecom arm Bharti Infratel and Indus Towers.
Bharti Infratel said the tower deal report was “speculative.”
