The ‘Effectively Free’ JioPhone is Clever Marketing By Jio: COAI

The operator body feels Jio’s latest disruption could herald growth of 4G users in India.

COAI feels that the strategy could work in both ways for Reliance Jio. 

(Photo: The Quint)

Industry body COAI on Friday termed the launch of JioPhone a "clever marketing" and said Jio selling the device at effective zero price is an attempt to save government levies like licence fee by the company.

The Reliance Jio's new 4G-enabled feature phone, at a fully refundable one-time payment of Rs 1,500, will offer free voice calls to customers with unlimited data when they recharge their account for Rs 24 onwards, whereas the full-month service will cost Rs 153 only.

COAI Director General Rajan S Mathews said the Jio's announcement is a bundled offer and the plan to sell it at an "effective zero price" is a "clever marketing position" as the move will help the company save licence fee and other government levies.

Previously, when you bundled a handset along with services, the 14 or 11% that an operator paid as licence fee got imposed on handsets. So, as an operator, one can’t compete with a handset seller because handset seller is not required to pay this extra levy of 11-14% 

Rajan S Mathews, Director General, COAI

He said a bundled offer would have increased cost of providing service for operators.

Reliance Jio offer is clever marketing position... they are saying the handset price is effectively zero. So no licence fee, spectrum usage charge has to be paid on that

Rajan S Mathews, Director General, COAI

Government will have to look at what sale of price for zero means," Mathews said.

Mathews termed Monday's launch as "clearly a big win for Jio" that will put pressure on incumbent telecom operators as well as on handset makers to match the offer and cable service providers.

Mathews, however, said this might have a bit of adverse impact for Jio as well.

For existing (Jio) consumers who are already paying Rs 303 and above, unless they want to spend additional Rs 1,500, there is no impact. Of the 120 million customers, some of them might switch to this new plan. In such cases, there will be dilution for Jio from customers paying Rs 303 moving to Rs 153

He said that with this launch, data usage is expected to significantly increase. Mobile phone companies body Indian Cellular Association (ICA) termed it as a disruptive move that will expand scope of 4G technology in the country.

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