KaiOS Eyes Global Expansion but Replicating India’s Success Would Be a Challenge

KaiOS has been the talk of the town after emerging as the third largest mobile operating system after Android and iOS. According to KaiOS technologies, it has garnered 100 million users over the past few years, with much of its success coming from India with the Reliance JioPhone.

India remains the largest market for KaiOS. However, the smart feature phone segment is now saturating in India. The growth rate is slowing down, and Reliance Jio’s focus may also shift to smartphones, to capitalize on the upgrade ready user-base. Therefore, a natural step for KaiOS is to expand into other emerging markets, especially those that have a similar demographics/economy.

Africa and LATAM are such markets. In LATAM, KaiOS entered the Brazilian market through the launch of Positivo P70S and Multilaser ZAPP. Later this year, it is likely to expand to other markets like Mexico. However, Africa offers a more compelling proposition.

According to Counterpoint, nine out of the top 20 countries with the highest potential for smart feature phones are in Africa. Earlier this year, KaiOS announced MTN Smart, marking its foray into the African market. Soon after the MTN Smart, it launched the Orange Sanza. Launch of both devices was through operator partnerships, something that KaiOS prioritizes. Not only is Orange partnering KaiOS to launch smart feature phones in Africa, but the operator has also participated in a Series B funding.

Partnerships with operators will help KaiOS make further inroads in African countries. In fact, through operator partnerships, KaiOS devices are already available in 22 countries across Africa. Clearly, Africa will be the next most important market for KaiOS after India. However, it might be a bit more challenging for KaiOS to replicate the scale and success it gained in India.

Among other use-cases like elderly population, and users looking for easy form-factors, the primary target consumers for KaiOS are the first-time high-speed internet users. These are mostly bottom of the pyramid population, which either has never experienced a mobile phone or are using traditional feature phones with limited data connectivity. Such users need to be shown the positive effects of data services to prepare them for monetization. Data needs to become a habit for the consumer before it opens up revenue opportunities. Hence, keeping the initial cost of accessibility low and developing relevant content should be the prime focus, and if successfully achieved, it will be pivotal for growth.

In India, the JioPhone’s launch price was US$20, which was refundable if the user returned the device after three years. This made the device almost free. It was also coupled with dirt cheap data rates. Further, there were a host of services at cheap prices which democratized internet usage in India.

Exhibit: Reliance Jio Ecosystem

The vertical integration of Reliance Jio and the application ecosystem played a key role in customer stickiness. This translated into an increased average revenue per user (ARPU). The same will be very difficult for any other operator around the globe to replicate.

In order to achieve scale in the African market, smart feature phones need to be cheaper than even US$20. Entry-level smartphones, available at a marginally higher price in Africa, can be a viable alternative. Also, smartphones remain a more aspirational product for Africans. KaiOS powered device has been launched at a lower price in other countries like Indonesia, where the device was launched as US$7 offering a much higher value proposition to consumers.

There is also a need for content and productivity applications to build user stickiness for the system. KaiOS has already been successful by striking the right partnerships across many players in the value chain and key partners. For content and productivity applications, developer partnerships are equally important. Many users are new to the app ecosystem. This offers a promising new market for developers – especially if they can develop relevant local content and services, something often missed by larger app developers in the mainstream app stores. Mobile payments could be one of the avenues which can be explored, especially in Africa.

The smart feature phone has carved out its place between a feature phone and a smartphone, as an affordable solution for high-speed internet access. With the success of JioPhone in India, many mobile industry stakeholders have renewed interest in tapping into the potential opportunity of upgrading feature phone users with a smart feature phone. The success of the segment depends on the balance of the three most important factors – device affordability, internet affordability, and relevant content. Partnerships among device OEMs, operators, KaiOS, and other ecosystem players will remain a key to achieve this balance. The smart feature phone ecosystem represents a US$28 billion revenue opportunity over the next three years – a number too significant to be ignored.


Please click here for our in-depth analysis of the smart feature phone segment.