India's top two service providers, Reliance Jio and Bharti Airtel, are now involved in a massive battle to acquire a greater share of the 2G subscribers as they get ready to move to 4G.
India has around 350 million 2G users, and both Reliance Jio and Airtel are adopting different strategies to move them to 4G, which has a higher Average Revenue Per User (ARPU).
Since the biggest impediment to upgrading to 4G is the cost of smartphones, both Jio and Airtel are focusing their efforts to make it possible for the 2G users to acquire a new smartphone. While Reliance Jio heavily subsidizes and bundles smartphones with services to push 2G users to migrate to the 4G network, Bharti Airtel recently launched a cash-back offer.
Jio is soon likely to launch a new smartphone JioPhone Next in collaboration with internet giant Google, which as per market reports, is expected to be heavily subsidized. JioPhone Next was earlier scheduled to be launched in September, but the chip shortage led to a delay.
It is not surprising that Jio is trying to attract the 2G subscribers of service providers. Being a pure-play 4G service provider, this is one crucial way in which it can enhance its subscriber base. On the other hand, Airtel would like to prevent the churn of its 2G subscribers who might be attracted to Jio's subsidized JioPhone Next.
This is not the first time that Jio has focused on the device subsidy to gain subscribers. It had earlier launched a brand called Lyf, which also offered 4G devices.
Bharti's cash-back retort to JioPhone Next
Bharti Airtel recently announced a program called Mera Pehla Smartphone (My first smartphone), which offers cash-back of as much as INR 6000 (around $80) off on the purchase of smartphones priced up to INR 12,000 ($160). The timing of Airtel's cash-back offer makes it clear that it is in response to the upcoming JioPhone Next.
The user will need to repay at least INR 249 ($3.30) for 36 months. Further, the offer is spread over three years, which means it is not likely to appeal to the extremely low ARPU customer. Additionally, the service provider has chosen 150 models from 12 device makers from Samsung, Xiaomi, Vivo, Oppo, Nokia, Lava, Lenovo, among others. Airtel's cash-back offer is designed to limit its subscriber churn and push the migration of its own 2G subscribers to its 4G network.
"Both Jio and Airtel are targeting a subset of 2G subscribers," said Ashwinder Sethi, principal at Analysys Mason. "Airtel's offer will appeal to subscribers who can afford 4G but don't see much value in migrating to 4G. On the other hand, Jio focuses on massive subsidies on devices that are likely to appeal to first-time smartphone users. While Airtel's cash-back offer spread over a three-year period will help in building loyalty, Jio's initial discount will help it to get a larger number of first-time users."
Reliance Jio is also pushing for policy change to realize its vision of 2G-mukt Bharat (2G-free India). The reasoning is that 2G subscribers are unable to leverage the power of mobile broadband because they cannot afford a smartphone.