COAI says JioPhone at Rs 0 is clever marketing

JioPhone

The Cellular Operators Association of India (COAI) has called Reliance Jio’s new JioPhone a clever marketing strategy that saves on government levies like licensing fees. The feature phone has made big waves across the industry after it got announced, with many stating that it’ll be a game changer.

To recap, the Reliance JioPhone is priced at Rs 0 but required a Rs 1500 security deposit. The latter amount can be recovered after 3 years, effectively making the cost of the phone Rs 0. In between, users will have to choose between Rs 153/month, Rs 303/month, Rs 24 and Rs 54 packs.

COAI Director General Rajan S Mathews points out the 11% or 14% which an operator usually pays as license fees on bundled handsets got imposed on the devices themselves. This makes it hard for the telecom firm to compete with a manufacturer since the seller is not required to pay the extra levy.

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Therefore, a bundled offer increases the cost of providing service on the operator side of things. However, Reliance Jio breaks away from this since the cost of the JioPhone is Rs 0, entailing no license fee or spectrum usage charge. Mathews notes that the government will now have to look at what a tag of Rs 0 means.

The COAI Director admits that this is a big win for Jio, but also cautions that the move could adversely impact its own operations. According to him, existing customers may want to switch to the new Rs 153 plan from the Rs 303 one. He also went on to talk about the pressure the launch puts on incumbent players and handset makers.

A top official of a leading telecom company told PTI that a customer may not want to be locked into a handset for 3 years at a stretch, preferring to have choices in hand. There’s also the matter of committing to pay Rs 153 per month for 3 years, though the smaller Rs 24 and Rs 54 packs take care of that to a certain extent.