Reliance's 'free' JioPhone a fatal blow for cheap smartphone makers

At first glance, Indian telecoms upstart Jio's bet on 'free' internet-enabled phones to win over poorer customers is a near-fatal blow for low-end handset makers, most already struggling with paper-thin margins on some of the world's cheapest devices.

But industry executives and analysts say Jio's crossover feature phone - not quite a smartphone, not quite a no-frills handset - could, in fact, be a boon to the lower end of the market and suppliers that feed it, creating a new in-between category and getting more people online for the first time.

The JioPhone, they say, creates a new phone segment aimed at millions of low-paid Indians, currently caught between basic, calls-and-text devices and fancier smartphones.

Reliance Industries, led by India's wealthiest man Mukesh Ambani, waded into India's cut-throat telecoms industry last year with its $30 billion bet on Jio, upending the sector with its cheap smartphones and data plans.

Last week, it announced a new phone, which allows digital payments and will come effectively free. Buyers can get a device for a refundable fee of 1,500 rupees ($23.30).

Currently over 60 percent of India's roughly 750 million mobile users use phones that allow only calls and basic texts, making so-called feature phones the country's single largest segment. But many will soon move up the chain.

"The concept of 4G feature phones is not new, and most Indian firms have already done their R&D," said Jaipal Singh, analyst with tech research firm IDC. "Brands such as Micromax, Lava, Intex and Karbonn will launch similar devices to either compete or partner with Jio."

Micromax, one of India's largest brands, said it was working on a 4G feature phone that would rival Jio's compromise offering. Lava, which launched India's first low-cost, 4G-enabled phone this year - selling for about $50 - said it could launch more if there was demand.

Samsung Electronics, the largest player in India thanks to its range of offerings, from high-end smartphones to basic $15 handsets, expects the new offerings to expand the whole market and "boost Samsung's mobile phone sales in future".