Jio to reach 500 million subscriber base with release of low-cost smartphones

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The stock of Reliance Industries, which has remained sluggish since March, gained almost 18% over the last month before the launch of its affordable smartphones on September 10, according to a report. Almost one-fourth of the total smartphones being made available by the company are priced below Rs 7500 per unit. This is likely to help the company reach a 500 million subscriber base by FY24 and improve ARPU by 10-15%, according to a report in The Economic Times.

Targeting the ‘affordable’ segment

RIL, India’s largest company by revenue and market, was scheduled to launch entry-level smartphones priced between Rs 5000 and Rs 7500, in partnership with Google.

Of the 430 million smartphones sold in India, around 25% are said to be in the “affordable” segment. Therefore, the business daily estimates, low-cost handsets in this segment would help Reliance Jio to migrate feature phone users to smartphones faster.

The adoption of smartphones by Jio’s feature phone users will be accretive to the average revenue per user (ARPU). According to the report, this move has the potential to generate incremental revenue of around Rs 4000 crore if even half of their customers migrate to smartphones.

As per the estimates of the company the move will open an addressable market of around 500 million subscribers for Reliance Jio, of which around 110 million will be the current subscribers of the company, while another 100 million will be among the existing entry-level customers looking for a replacement.

Increasing data consumption

This is likely because the average replacement cycle for smartphones in India is about 2.5-3 years and nearly 85 per cent of the smartphone sales in the country are through replacement buying.

Jio’s subscriber base was around 440 million at the end of June 2021, and it added between 14-15 million net subscribers in the past two quarters.

According to the analysis provided by the media report, Jio is expected to clock an ARPU of Rs 154 and Rs 183 for the current and next fiscal years, which is nearly half of the incremental earnings through the growth hinges on tariff increase and subscriber growth.

A data that should bolster this estimate is the increasing rate at which data is being consumed in India. The data usage of smartphone users in India rose to around 11.5 gigabytes (GB) a month at the end of FY21 from 3 GB five years ago given the highly competitive pricing by telecom operators.