Flagging concerns on the success of the new feature phone offering - JioPhone - from Reliance Jio, rating agency ICRA on Tuesday said it's positive from an ARPU (average revenue per user) perspective, while rival Crisil estimated a massive slowdown in data usage growth to 4X in the next five years from the present growth rate of 24X.
"JioPhone is likely to keep the competitive intensity of the industry high with RJio targeting strong addition of lower-ARPU subscribers and/ or rural subscribers," ICRA said in a note.
The report said in the long-term, Reliance Jio can help push up the overall ARPU levels of the industry with the JioPhone product aimed at low-ARPU users.
The agency, however, flagged a slew of concerns for the success of the offering, including it being a bundled phone - something that has not succeeded in the domestic market so far many times. Other ICRA concerns include the "tricky issue" of bundling of apps and creating a 'walled garden', and whether the JioPhone would be able to let customers use other apps.
"Marketability and acceptability of JioPhone would hinge on the kind of data experience it offers to the users without the port to connect to the TV, which comes at a higher monthly charge," ICRA said, adding the 'effectively free' phone can also increase funding requirements for the company.
Meanwhile, Crisil said it expects data usage growth to slowdown to 4X in the next five fiscal years, as against the 24X growth seen in the previous five years. The number of data subscribers is estimated to double to 900 million and the penetration will also double to 80 percent in the period, it said.
Crisil said the faster mobile data penetration would be supported by a continued drop in tariffs given the intense fight for market leadership, and telcos will have to "increasingly sweat per-subscriber usage to bolster incremental revenues."
Mobile data usage per subscriber nearly doubled to around 1.3GB per month between fiscal 2013 and 2017 on faster adoption of 3G and 4G services, Crisil said, adding Jio's free data and a sharp 40 percent fall in tariffs in fiscal 2017 were the growth propellants.
Over the next five years, a larger number of new users will be from rural areas and their relatively lower data usage would impact the industry's average data usage adversely, the report added.
Crisil said a similar trend was observed in China as well and added the faster and cheaper Wi-Fi will play an important role from here on.
"The cost of offering services on Wi-Fi is just a fifth of mobile, and speeds are significantly faster, too. We expect a sharp increase in Wi-Fi hotspots over the next three to five years, which can be a drag on mobile data growth once penetration growth plateaus," the agency said.
Despite the drop in tariffs, mobile will be 80 percent costlier than Wi-Fi, it said, adding the country has only around 35,000 hotspots compared with 58 lakh and 6.5 lakh in China and South Korea, respectively.
The Jio Phone looks awesome but is there any catch? We discussed that on our weekly technology podcast Orbital, which you can subscribe to via Apple Podcasts or RSS or just listen to this episode by hitting the play button below.