After disrupting the broadband space, Reliance Jio is all set to overwhelm the mobile phone market. The company on Friday said that it would launch a new 4G feature phone in September that would be sold for free.

A buyer will have to deposit ₹1,500, which will be refunded if the phone is returned to the company after three years of use. The phone will, however, be locked down to work only on RJio’s 4G network.

Reliance Jio has built capacity to sell 5 million 4G feature phones a week starting September and has set a target of selling at least 260 million phones within 12 months of launch. There are about 500 million feature phone users in India today.

Currently, there are no feature phones in the market, which support 4G services, including voice telephony. Feature phones account for over 55 per cent of phones sold in India and up until now, these users could not enjoy fast 4G speeds.

The Jio phone boasts of front and back cameras and a 2000mAh battery, NFC (near-field communication) capabilities, and comes pre-loaded with Jio apps. It runs on Jio’s own operating system, built on HTML5. While the phone has been developed in-house, the actual phones will be made by third-party equipment manufacturers like Foxconn and Flextronics.

The cheapest 4G phone available in the market costs ₹3,000. The new Jio phone practically puts a 4G phone in the hands of users for free. The phone is available for beta-testing from August 15 and for pre-booking from August 24.

The first units will be shipped out in September, Chairman Mukesh Ambani said at Reliance Industries’ annual shareholder meeting. “Because of Jio, India’s 4G coverage will be more than its 2G coverage,” Ambani said “The JioPhone will make the 2G feature phone obsolete.”

Rajan S Mathews, Director-General at the Cellular Operators Association of India (COAI), said. “This is a compelling offer and is beneficial to customers. At these price points, in the short term, incumbents are at the risk of losing customers.”

“The pressure is also now on handset manufacturers, with RJio planning to make about 5 million devices every week, which is difficult to match,” Mathews added.

In the 10 months since the launch of Jio’s 4G mobile services, over 125 million users have signed up. The new feature phone opens up the lower end of the market to RJio. However, this segment of the market has not taken well to previous efforts by operators to lock them to a particular network. The other challenge is that RJio’s tariff plan is higher than the average revenue per user (ARPU) for this segment.

The telecom industry’s current ARPU per month, an initial report by brokerage firm UBS said, is ₹120-130, to below to ₹100 for feature phone users. The cheapest Jio plan is higher than the current ARPU, albeit with data benefits. The cheapest network plan that a Jio feature phone user can buy, with free voice calls and 500 MB of data a day, is for ₹153 a month, ₹54 a week or ₹24 for a two-day plan.

Jaipal Singh, Senior Market Analyst, IDC India, said, “It will not be disruptive or a category killer. For most people in this segment, internet is not a priority; they may not even be aware of how to use the internet.”

But clearly Ambani is looking to a plan. He told shareholders that RIL will soon have over 10,000 Jio offices, in every city and tehsil in the country.

“These offices will service our sales channel partners and over 10 lakh physical retail outlets that sell Jio services. In addition, we will integrate with all major e-commerce platforms,” he said, laying out the new phone’s distribution plans.

(With inputs from Varun Aggarwal)

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