4G smartphones at Rs 500 on a monthly plan of Rs 60

Mobile phone users in India, especially the millions who use feature phones, could be in for a bonanza. Bharti Airtel, Vodafone India and Idea Cellular, the top three operators, are working with handset companies to make 4G smartphones drastically cheaper than feature phones - maybe as low as Rs 500 - and offer them with bundled voice and data plans for Rs 60-70 a month. The approach is different from Reliance Jio Infocomm's strategy of subsidising 4G feature phones and is aimed at countering the latest Rs 49 a month plan for JioPhone users, which may attract a massive chunk of their voice subscribers.

While low-cost smartphones bundled with voice and data plans will hurt average revenue per user (APRU) in the near term, the telcos hope to retain their users and upgrade them to smartphones to increase data consumption in the medium to long term, analysts said. "We will gear towards low-cost smartphones via alliances. Smartphones are expected to become cheaper, so for an offering with them, it makes more sense than setting up our own phones," said an executive at one of the telcos, adding that it won't subsidise phones the way Jio has. An executive at another operator said the intention is to bring down the effective prices of smartphones to the level of feature phones or even lower with bundled data and voice packages and cashback offers.

Bharti Airtel, Vodafone India and Idea Cellular declined comment for this story. The three carriers are already collaborating with handset makers and offering bundled data and voice along with cashbacks with smartphone priced under Rs 1,500, which is the upfront amount needed to buy Reliance Retail's JioPhone, refundable after three years. The operators, already battling slumping revenue, profitability and high debt, are lowering the price bar after Jio recently slashed the minimum monthly recharge for JioPhone users to Rs 49 from Rs 153, with unlimited voice and 1 GB of data for 28 days. Feature or basic phone subscribers typically use mainly 2G voice services and account for 65-70% of India's billion-plus mobile subscribers.

They contribute 50% of the telecom sector's revenue, sizeable enough for India's operators to try everything to retain them, analysts said. Bringing out a new feature phone and subsidising it will be akin to setting up a new business, which will be tough given the revenue pressures, according to Rajan Mathews, director general of the Cellular Operators Association of India, which represents all major telcos. Bundling smartphones with data and voice plans is a better option.

"They will have to revise pricing, may not go head to head, but could bring in plans for phones starting from Rs 60-70 range," said Mathews. The arrival of Android Go-based smartphones at under Rs 2,000 has opened the doors for more aggressive bundling by the older operators. Micromax has announced a smartphone based on Google's operating system, which is likely to be available in March at under Rs 2,000. "The launch of low-cost 4G chipsets from Spreadtrum and MediaTek with Google's Android Go strategy makes it possible for OEMs to offer cheap smartphones that live up to the first-time smartphone user's expectations," said Shobhit Srivastava, a research analyst at Counterpoint Technology Market Research.

"The ideal upfront cost will be anywhere between Rs 1,500 and Rs 2,000," Srivastava said. "This can well come down to the level of Rs 500, depending on the plans that carriers offer." An executive at a smartphone maker said making an affordable VoLTE feature phone still costs about Rs 800 more than a JioPhone and it would be challenging for telcos to bridge that gap with offers alone. "There will have to be a subsidy involved on feature phones, which they won't be able to give, so the better option is to go for low-cost smartphones," the executive said, asking not to be identified.



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