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Google and Jio are trying to convert 450m Indians into smartphone users

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Google and Juk of Mukesh Ambani hope to crack one of the largest untouched smartphone markets in the world, launching a device they hope will be good enough to convert 450m Indians into “dumb” phones into smartphone users.

The JioPhone Next, successor to the previous generation Ambio JioPhone, was designed by companies to run a custom version of Android. It will offer a mix of Google and Jio apps, with voice assistance in several Indian languages ​​for users with limited literacy. Analysts believe it will be traded at less than $ 50.

“Jio was good at two things. One is mega-spear. Then, breaking the price [barrier]”Said Neha Singh, founder of data provider Tracxn in Bangalore.

While wondering how much money one or the other company would earn on the phone, the broader goal seems clear: to upgrade as many as 450m Indians using 2G and even older mobile phones as possible.

Ambani and Sundar Pichai, executive director of the parent company of Google Alphabet, have suggested that the JioPhone Next could be launched elsewhere in the world, as Google tries to attract what it calls the “next billion” of global Internet users on the Internet and Jio plans to expand overseas.

“Google wants to be the first calling point for these users,” said Vivekanand Subbaraman, an Ambit Capital brokerage analyst in Mumbai. “These new Internet users, they don’t use a desktop. They don’t know that the Internet is an open protocol. For those new Internet users, these apps are the Internet.”

The video will be a great opportunity. New smartphone users, many of whom don’t own televisions, watch YouTube or stream cricket matches streamed on JioTV bring advertising and revenue data, and a base to start selling services as payments.

For Jio, which was launched in 2016 and used lower prices to inflate 426m users, it’s an opportunity to repeat the success of its original JioPhone. Ambani made available the basic 4G phone for a deposit of Rs1,500 ($ 20), which was reimbursed after three years, helping to move more than 100m of devices.

Jio’s growing growth helped attract $ 20 billion in investments last year from Facebook and Silver Lake alongside Google. But the telecommunications company is under pressure to continue to grow its number of users and its revenues.

More than a fifth of Jio’s subscribers are inactive, and its average user turnover of Rs138 ($ 1.85) per month is lagging behind rival Bharti Airtel. Ambani said he will list Jio on public markets, but he first needs to show that he can bring more Indians to smartphones, and convince them to consume more Internet services.

Graph showing India’s smartphone market

However, the JioPhone Next faces an uphill challenge. The Indian smartphone market is dominated by Chinese brands such as Xiaomi and Vivo, and Google’s previous efforts to make a dent in the market – as with its Pixel smartphone – have been unsuccessful.

About 80 million existing JioPhone users are expected to end their contracts in the next two years, according to investment bank Jefferies, which will pay off in the long run for businesses calling on them to upgrade.

The more than 300m remaining 2G users are also a difficult market to crack. Many, made up of economically vulnerable demographics such as migrant workers, are used to recharging minimum wages of less than Rs50 ($ 0.67) per month to talk to family at home.

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The companies have not released the price of the new smartphone. With a global shortage of chips and other mobile phone components, industry participants doubt that a price of $ 50 or less will be possible without resorting to significant subsidies.

“I don’t think the situation of the worldwide supply chain will allow a radically lower cost than existing players, to say the least,” said Pankaj Mohindroo, president of the India Cellular & Electronics Association, which represents the mobile phone manufacturers. “I don’t see an earthquake coming for us.”

Google is testing similar projects elsewhere, last year it joined French operator Orange to launch a $ 30 “Sanza touch” smartphone in several African countries. They say it’s the most affordable smartphone available, but sales have been modest.

Chart of Millions of units columns showing Adoption rates for Jio phones have grown a lot in India

For Ambani, the new smartphone is one of several products he hopes to transform his energy-focused group into what he calls India’s “national champion of technology”.

But only four Jio apps are in the top 100 of the Google Play Store, according to App Annie, including the JioSaavn and MyJio music streaming app, which add several services like phone recharges or quizzes. Jio’s chat and shopping apps lag behind rivals.

Meanwhile, Jio’s online shopping company, JioMart, is present in 200 cities and offers lower prices than its rivals, including Tata’s BigBasket or SoftBank-backed Grofers.

But it lags behind metrics such as app download, entry and trash size, according to brokerage Motilal Oswal. A partnership with Facebook to offer the service through WhatsApp is still in testing more than a year after it was announced.

Google hopes its partnership with Ambani will help it avoid the fate of Facebook’s first attempt to conquer the Indian internet market, which has led to regulators banning an attempt to give limited free internet to guide users towards and its app.

Neil Shah, an analyst at Counterpoint Research, said the “biggest barrier” to the new phone would be its price. He said that even with subsidies, users should probably double what they were used to paying a month for 2G services at bargain prices.

The other hurdle is simply whether sufficient phones will be able to be made to meet the ambitions of the companies. Given the scarcity of parts like semiconductors, Mohindroo estimates that Jio will be limited to shipping a couple of million devices a month for the foreseeable future.

“The global mobile market is very consolidated now with global players having very large volumes,” he said. “Securing the bid against these giants in a situation of scarcity will be a huge challenge.”

Reliance and Google have not commented.


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