Google and Jio seek to convert 450 million Indians into smartphone users

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Google and Mukesh Ambani’s Jio hope to decipher one of the largest untapped smartphone markets in the world by launching a device they hope will be cheap enough to convert 450 million Indians on “dumb” phones into smartphone users.

The JioPhone Next, a successor to Ambani’s previous generation JioPhone, was designed by companies to run a customized version of Android. It will offer a combination of Google and Jio apps, with voice assistance in multiple Indian languages ​​for users with limited literacy. Analysts believe it will be marketed for under $ 50.

“Jio was good at two things. One is the mega-launch. Second, break the price [barrier]”said Neha Singh, founder of data provider Tracxn in Bangalore.

While he wondered how much money both companies would make on the phone, the broader goal seems clear: to upgrade as many as possible of the 450 million Indians who use 2G phones and even older and dumber.

Ambani and Sundar Pichai, chief executive of Google’s parent company Alphabet, have suggested that JioPhone Next could be rolled out in other parts of the world as Google seeks to attract what it calls the “next billion” global internet users and Jio considers l expansion abroad.

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

The video will be a great opportunity. Getting new smartphone users, many of whom don’t own TVs, watching YouTube or streaming cricket matches on JioTV will bring data and advertising revenue, and a foundation to start selling services like payments.

For Jio, which launched in 2016 and used rock-bottom prices to reach 426 million users, it’s a chance to repeat the success of its original JioPhone. Ambani made the basic 4G phone available with a deposit of 1,500 rupees ($ 20), redeemable after three years, helping move more than 100 million devices.

Jio’s surge in growth helped attract $ 20 billion in investment last year from Facebook and Silver Lake along with Google. But the telecom company is under pressure to keep increasing user numbers and revenue.

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

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 dent the market, such as with its Pixel smartphone, have failed to catch on.

About 80 million existing JioPhone users are expected to terminate their contracts over the next two years, according to investment bank Jefferies, making them low-cost fruit for deals that entice them to upgrade.

Even the more than 300 million 2G users left are a difficult market to crack. Many, made up of economically vulnerable demographic groups such as migrant workers, are used to charging minimum prices below Rs50 ($ 0.67) per month to talk to family at home.

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

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

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

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

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 bundles different services like phone top-ups or quizzes. Jio’s chat and shopping apps follow rivals.

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

But it falls behind on metrics like app downloads, revenue, and cart size, according to brokerage agency Motilal Oswal. A partnership with Facebook to offer the service via WhatsApp is still being tested more than a year after the announcement.

Google hopes its partnership with Ambani will help it avoid the fate of Facebook’s first attempt to take over the Indian internet market, which led regulators to ban an attempt to provide limited free internet so it could direct users to its own. 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 are likely to double what they used to pay a month for low-cost 2G services.

The other hurdle is simply whether it will be possible to make enough phones to meet companies’ ambitions. Given the shortage of parts like semiconductors, Mohindroo estimates that Jio will just ship a couple of million devices a month for the foreseeable future.

“The global mobile phone market is now very well established with global operators having very large volumes,” he said. “Securing supply against these giants in a shortage situation will be a huge challenge.”

Reliance and Google have not commented.

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