Bharti Airtel Rehashing JioPhone Next Counter-Strategy; Considering Co-branded Bundled Smartphone

Sources have said that Bharti Airtel has considered co-branded deals with smartphone makers, ahead of the JioPhone Next launch.

Bharti Airtel looking to Jump on the Smartphone Bandwagon

Given the fact that Airtel has a substantial 2G user base, the move comes as a logical next step. However, it has made it clear that it won't engage in a subsidy war with Reliance Jio. Notably, Reliance Jio will look to heavily subsidize the JioPhone Next to keep the price reasonable and justify its tagline. Since Airtel has about 120 million 2G users, the JioPhone Next has left people feeling uncomfortable at the telco.

More importantly, Bharti Airtel recently floated a request for proposal for smartphones. People familiar with the matter have said that Lava, Karbonn and HMD Global have shown interest and will present possible devices and specs shortly. Interestingly, the telco has already decided on the specs sheet of a possible smartphone; right now, the wait is on for the JioPhone Next's price tag.

Meanwhile, some industry trackers said the ongoing component shortage and consequent price increases might restrict the headroom for the amount of subsidy Jio could provide. Jio is believed to be targeting to sell the 4G smartphone at ₹3,500-4,000.

Airtel's Biggest Chance Comes as JioPhone Next gets Delayed

Jio recently postponed the launch of its smartphone to around Diwali from September 10. This might serve as a great opportunity for the eternal bridesmaids of the telecom industry to catch up.

One of the people in the know said, “Airtel’s device offering is ready but the question is subsidy and if they would be able to match Jio’s offering. Airtel has sorted out specifications but it will be difficult to match the pricing with subsidy for them … but it will come up with an offering".

The buzz that Jio has created with its extremely priced smartphone will also serve as a positive feedback for Airtel. The company can also revive its "mera pehla smartphone" (my first smartphone) initiative, to compete.

Interestingly, Airtel CEO Gopal Vittal had rebuked Jio for taking the subsidy path. He added that the second largest telco had a way on “how to deal with (JioPhone Next)".

“…having said that, it is a competitive industry, we will look at what happens in the marketplace through a combination of good marketing optics and capability and platforms around locks,” Vittal had said.

What's Happening on the Airtel's Phone Front?

Bharti Airtel have already finalized the specs sheet and completed pilots with OEMs for an affordable phone. Airtel has also looked at partnering with banks to offer lending options to customers.

Talking about the first aspect, no will commit the numbers Airtel will need before the latter puts a price on the offering. OEMs will seek to avoid any and all "inventory risks", given the widespread component shortage. Hence, OEMs would be vary of sinking their components in an uncertain venture.

On the second option, industry executives have said that lenders remain unconvinced of the target audience of Airtel; most of the said target audience would not have a credit history, hence, lenders might find it difficult to create a strong recovery mechanism.

Ashwinder Sethi, from Analysys Mason, a consulting firm, said that one of the biggest detractor for many feature phone users remains the price of a reasonable entry-level smartphone. Notably, the cheapest of these phones still retail at about ₹6,000-7,000. He added, “while Bharti Airtel has mentioned that it will stay away from a subsidy-driven approach, it will need to reduce the entry barrier possibly through partnerships for financing of smartphones or OEM partnerships for low-cost smartphones that offer good experience".

"Otherwise, it could see higher churn as well as a loose share of gross adds, especially on low-end prepaid users", Sethi added.