According to Pratik Joshi, head of device ecosystem at India’s second largest telco, Bharti Airtel is closely working with financing companies to encourage feature phone to smartphone conversion.
“From a base of 350 million feature phone users, organically only about 40 million people move to smartphones every year. By that rate, it will take 7-8 years for everyone to move to a smartphone,” Joshi said, speaking at a panel discussion at the India Mobile Congress 2022.
With the price difference between a feature phone and an entry-level smartphone increasing sharply as high-end features trickle down to the entry-segment, Joshi sees a lack of organic conversion as a stumbling block in the telco’s plans to monetize its 5G services, which it launched in eight Indian cities on Saturday.
According to Joshi, the 350 million feature phone users are mostly from rural areas, lack a credit history, and are underserved by device financing companies like Bajaj Finance.
“One initiative is to closely work with these device lending companies to enable loans to people who want to move to smartphones.”
“One element we bring as a telco is the visibility we have of feature phone customers. Here we can work closely with the lenders to target the right audience and extend an affordability loan to them,” Joshi said.
He also stated that Airtel will collaborate closely with smartphone OEMs to improve the device proposition and lower the upfront cost of the device through cashbacks, offers, and so on.
Airtel is already collaborating with Realme to provide a Rs 750 upfront discount on an entry-level model in order to attract feature phone customers.
Shifting towards more premium segments
While low-cost smartphones are required to help feature phone users upgrade, the market is shifting toward more premium segments.
Joshi stated that the sub-Rs 10,000 segment contributed 50% of shipments in 2019, but has now dropped to less than 20% in 2022.
However, the price going up is only a short term factor. As the scale matures, price will start stabilising and affordability will start happening.
“Even today, you can come up with a Rs 7000 5G smartphone, but the feature specifications won’t be adequate for the type of services that 5G will enable,” Kalantri said.
A senior Airtel executive said Airtel will have 5G services across the top tier cities by March 2023, and across India by March 2024. However, 5G devices penetration remains low at 9-10%, which poses a hurdle in achieving high return on capital.
