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Out with the old, in with the new.
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India is going to come online using old-school feature phones

By Ananya Bhattacharya

As countries like Singapore, Taiwan, and Australia permanently shelve their 2G networks, the majority of Indians are still holding on to their 2G-capable handsets. The simple feature phones—essentially stripped-down versions of the smartphone–offer basic access to the internet and allow people to store and play music. What more do you need?

A recent report (pdf) by Mobile Marketing Association and market research firm Kantar IMRB noted that out of a sample of 979 feature phones users across India, only 15% intend to switch to a smartphone on their next purchase.

Cost remains the chief deterrent to convincing people to switch to the latest smartphones. Forget 4G—nine out of ten people in the country still use 2G networks because they find 3G too expensive. Moreover, rural and lower-income users may not even be able to afford state-of-the-art handsets.

Battery life is another factor. In India, where frequent power cuts are commonplace and hundreds of millions of people live without electricity, feature phones’ longer battery life is much preferred to power-hungry smartphones.

Yet another hurdle is convincing people who are used to simple keypads to navigate complicated touchscreen smartphones. In India there is a general “lack of literacy” about the need for mobile internet and related applications. While the emerging markets of Asia and Africa are home to more than 1.3 billion feature phone users, in these regions, “voice calls and texts remain the king.”

The 4G feature phone-of-the-future

To bridge the gap between 2G phone-lovers and 4G network providers, an estimated 60 million 4G-enabled feature phones will ship globally in 2017, according to Counterpoint Research. Nearly half of these sales are expected to come from India, with close to 200 million 4G feature phones projected to sell over the next five years.

The 4G feature phone could serve as the middle ground between smartphone-averse users and telcos that want more customers to move to the cost-efficient 4G network. The durable, low-cost handsets will look and work as their older models do but will come pre-loaded with an array of apps and services, ranging from music to social networks. Moreover, as more of the 2G spectrum frees up, it can then be re-farmed into the 4G or 5G era.

The market makers

Some key companies have already forayed into the nascent market. Earlier this week, chipmaker Qualcomm introduced its Qualcomm 205 Mobile Platform, which aims to bring 4G LTE connectivity and 4G services to entry-level feature phones. Apart from connecting more people to the internet, the company said in a statement that the platform will also facilitate faster and more secure access to for financial transactions.

One of the mobile market’s most recent yet successful players with over 100 million users, Reliance Jio, started retailing India’s first ever 4G VoLTE (Voice over LTE) phone by domestic smartphone manufacturer Lava in February 2017. The telco, spearheaded by India’s richest man, Mukesh Ambani, is reportedly launching its own 4G-enabled feature phones priced at under Rs999 ($15) and Rs1,499 ($23), too. Another local brand, Micromax, is also working on its own VoLTE phone at the heels of Jio’s resounding success.

According to Counterpoint Research, operators like Reliance Jio have had success attracting rural 2G users to their 4G networks by offering free unlimited VoLTE calls. In the long run, weaning people off laggard 2G networks could help big brands like Apple overcome struggles in gaining traction in the country.

As customers “rapidly get used to 4G networks, [they] will itch for a better phone when they upgrade in next two years,” Neil Shah, research director of devices and ecosystems at Counterpoint Research, told CNBC. “Basically, this trend will help these users to cross the chasm–which is what Apple would actually like.”