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What Does LYF’s Success Mean For Indian Telecom Industry?

Devices

What Does LYF’s Success Mean For Indian Telecom Industry?

Recently, Reliance Industries’s devices brand, Lyf captured 7% marketshare in the first quarter of the current calendar year, as per Counterpoint Research. The new entrant in the Indian mobile devices has become the fifth largest player in the market. The company also emerged as the second largest Long Term Evolution (LTE) phone supplier after Samsung, surpassing Micromax and Lenovo in the same time period, as per the same research.

Besides CyberMedia Research and Services Ltd says that Lyf was India’s third largest selling mobile phone brand in the March quarter with 12.6% marketshare, behind Samsung and Lenovo. The company’s devices are sold through Reliance Digital, Digital Express and its official website. It has nearly 3,245 stores under Reliance Digital, Digital Express and Digital Express Mini brands. Lyf has also tied up with many mobile retailers and ecommerce websites. LYF phones come in four variants: Flame, Earth, Water and Wind, which are available in the price range of Rs 5,500 to Rs 20,000. The company has so far launched nearly 15 variants.

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Indian telcos have traditionally shied away from offering bundling deals to subscribers. This is mainly because of low Average Revenue Per User (ARPU). The country has one of the lowest ARPU in the world and with more than 90% subscribers as pre-paid, it is not surprising that service providers have steered cleared of offering devices at discounted prices to their subscribers.

Reliance Jio is also the first operator in the country, which decided to launch its own devices brand. It decision to do so was primarily driven by necessity of making Voice over LTE (VoLTE) devices available in the market. RJio plans to differentiate itself by offering VoLTE experience to its subscribers and since the market was more inclined towards 4G, the company was left with little option but to launch its own brand. The fact that it owns one of the largest retail chains, Reliance Digital, only helped in making this decision.

RJio’s Lyf experiment would be keenly watched by other telcos. The recent success of Reliance Jio’s devices brand, Lyf raises a number of questions. A key among them is whether it Will inspire other Indian telcos to launch their own devices brand or start offering available brands at a discounted price to push 4G technology?

Before we get to that question, it is important to take RJio’s devices success with a pinch of salt. Lyf started shipping only in December 2015 and till April it had sold nearly 1.5 million devices. So it is safe to assume that the first quarter was more of a channel filling than actual sale. It is only in the second quarter that the real sale would be apparent.

However at the same time the recent price drop, launch of new models and the launch of RJio’s 4G network would fuel the growth of Lyf. Reliance Communications has already started offering RJio’s 4G services to its subscribers in a few circles. Based on these facts, the next few quarters should witness healthy growth for Lyf. It is unlikely that the Indian telcos would launch a new devices brand now. It is comparatively easier for a Greenfield service provider with new technology to push its own devices brand. A well-established service provider, on the other hand, would be reluctant to launch its own devices brand now.

At the same time, bundling of devices with their services might be something that some Indian telcos would like to experiment with. Idea is already doing at a small scale and Bharti Airtel and Vodafone are bundling Apple’s iPhone with their services. It remains to be seen if this would actually lead to change in the prevalent business model in the country.

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