The latest entrant to India’s telecom market, Reliance Jio, has announced an unprecedented offer — a 4G enabled phone with support for apps and videocalling for free.

According to Mukesh Ambani, customers do not have to pay anything for the phone as the cost of the phone will be returned to the buyer when he returns the device after using it for 36 months (three years.)

However, depending on the fineprint, the phone can turn out to be really free, as claimed, or it could mean that you will get your money back only if you use the phone for three years.

In other words, the question is — what happens if you return the phone after one year? Will you get the security deposit back?

If yes, then the phone is indeed free.

Otherwise, the user will be paying Rs 153 every 28 days for a period of three years, which works out to about Rs 6,000. If the monthly tariff is increased, the total cost could rise further.

UPDATE: The phone has to be used for three years to be eligible for refund of deposit. Moreover, the connection has to be recharged at least once in 90 days.

For now, the offer is likely to cause a huge impact in the market as it is very attractive from a features and pricing point of view.

The phone’s almost a smartphone in terms of its abilities and support for apps such as JioCinema and JioMusic.

However, it will not support traditional Android apps such as WhatsApp and Facebook. These companies, however, may be able to come out with customized versions of their apps that can work on these phones if Jio permits them.

Another likely restriction is that of speed. Ambani compared the phone’s data to 2G offerings from other networks, which suggests that the speed of the connection will be restricted.

Moreover, the company chairman also said that to watch video, users should recharge with regular tariff plans such as Rs 309, which also suggests that the 153 plan will have speed restrictions. It therefore remains to be seen if apps like JioTV will work on the 153 plan.

Another key unknown is demand and supply. Ambani promised 5 million phones every week starting in September.

However, the addressible market size for the phone in India would be anywhere between 25 to 50 cr, assuming that it works as shown. Initial demand would be in the range of about 5 cr or 50 mln.

At 5 mln per week, the initial demand will take about 10 weeks, or two-and-a-half months to satisfy. This could mean long queues outside the Reliance Digital stores and other places.

On a positive note, Ambani did say that the company is tying up with ecommerce players very soon, which indicates that the JioPhone will be available online as well.

Jiophone will offer unlimited data and voice calls for Rs 153 per month.

Other features of the single-SIM phone include the ability to connect audio-video or AV cable and have the screen mirrored on your TV.

This allows the phone to be used as a set-top-box for viewing videos and TV channels.

The interconnection and cable will work with any TV with AV in ports.

Ambani said the phone will be able to stream videos for 3-4 hours using 1 GB of data, which seems to suggest that the consumption will be about 300 MB per hour.

The phone also has extensive support for audio commands.

It has a 2.4 inch QVGA display, FM, camera and a torchlight.

JioPhone will be available for booking starting Aug 24, and for testing from Aug 15.

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