A $4.5 billion (Rs. 33,737 crores in India) deal under which Alphabet’s Google will collaborate with India’s Reliance Industries on a new smartphone likely heralds a big shake-up for the world’s second-largest mobile market, industry executives and analysts say.

Reliance boss Mukesh Ambani, announcing the partnership at his company’s annual meeting last week, said Google would build an Android operating system to power a low-cost “4G or even 5G” smartphone that Reliance would design.

The new phone is set to pose a major challenge to Chinese vendors such as Xiaomi and BBK Electronics, owner of the Realme, Oppo, and Vivo brands, which currently dominate a $2 billion (roughly Rs. 14,955 crores) market for sub-$100 (roughly Rs. 7,400) smartphones in India.

Powered by a clever mix of Bollywood, cricket-driven marketing and product features such as powerful cameras, the Chinese firms sell roughly eight of every 10 smartphones in the country.

“If history is anything to go by, Reliance will undercut other brands and pose a real threat to the low-end smartphone market,” said Rushabh Doshi of tech researcher Canalys.

Reliance executed a similar plan in 2017 with the launch of the JioPhone, a no-frills device that gave users Internet access for as little as $20 (roughly Rs. 150). JioPhone now has more 100 million users, many of whom are Internet first-timers.

“They (the Chinese players) are likely to cut their price to compete and their margins could shrink,” said A Gururaj, the former India head of contract manufacturers Wistron and Flextronics. “I see the Google-Jio phone as a big hit.”

Reliance’s ambition to hand a smartphone to every Indian could also win subscribers from telecoms rivals Vodafone Idea and Bharti Airtel, who still have hundreds of millions of users with old-style feature phones on basic 2G networks.

Realme declined to comment. Reliance, Xiaomi, Oppo, and Vivo did not respond to requests for comment.

Vodafone Idea and Bharti Airtel did not immediately respond to requests for comment.

Content is king

The alliance will see Google invest $4.5 billion (Rs. 33,737 crores in India) in Reliance’s digital unit, which houses telecoms and fibre businesses as well as music and movie apps.

Jio Platforms has also since April won the backing of global financial and tech investors including Intel and Qualcomm, which could bolster its smartphone ambitions.

While Reliance has given no details on the specifications or price of the new smartphone, the timing of its launch, or who might build it, the Jio network’s 387 million subscribers and the Google brand name will give it a big leg up.

The Reliance-Google phone would likely be optimised for the Jio network and offer users improved performance, said Arvind Vohra, a tech consultant and the former India head of China’s Gionee.

Just as important are the possibilities for bundling Jio’s massive video and music libraries with the phone. Google’s Android team also aims to ensure access to apps related to health, communications and jobs, and ease of use for first time smartphone owners, Sameer Samat, vice president for Android and Play at Google, told Reuters.

That kind of packaging could help woo roughly 350 million Indians who still use basic, non-touch phones and are yet to taste high-speed mobile data on fancier devices.

“This will help users choose a device for its software and bundled content rather than just specs alone,” said Vohra.

The collaboration with Google could also set the stage for further partnerships between smartphone makers and Reliance to make devices specifically for the Jio telecoms network, said analysts.

Some Jio customers are already making plans to upgrade to the Reliance-Google smartphone when it hits the market.

“I’d like to try the new Reliance smartphone and since I’m already a Jio customer my first preference will be to remain with the network,” said Rawil Ansari, a construction worker from a village in India’s eastern Bihar state, who has been using a JioPhone for the past two years.

© Thomson Reuters 2020