• The new Indian OS for smartphones doesn’t really know what it wants to be, but I think it will appeal to government entities and enterprises with very little interest coming from consumers who have long since sold their digital souls to Google.
• BharOS is a new OS based on Android that has been developed by a government-backed start-up (JandK Operations) that is being touted as India’s answer to Android when in reality it is nothing of the kind.
• Furthermore, the way that this OS will be managed indicates that its creators have not really decided whether this is a super secure OS or if it is an attempt to go after the consumer digital ecosystem in India.
• For example, the best way to make Android secure is to lock it down completely with no installations or updates beyond those made at the factory being permitted.
• However, BharOS will focus on rapid OTA updates and will ship with nothing set by default with users being allowed to decide what to use for each of the Digital Life services where they live their digital lives.
• These apps will be provided by organisation-specific Private App Store Services (PASS) which have been curated and vetted to ensure that they are both secure and private.
• PASS appears to be an enterprise or government service where the entity issues devices to its employees who then install the apps that they need for the work that they do.
• It does not sound like anything that will remotely appeal to users in India, although a recent ruling will mean that Google will allow forked versions of Android to be built in India (see here).
• Hence in theory it is possible that we will see the Google Play Store appear on BharOS, but in practice, I suspect it is unlikely.
• In order for the Google Play Store to run properly, it needs all sorts of extensions not present in the base Android OS that form part of Google Mobile Services.
• Furthermore, app developers expect these extensions to be present on Android devices meaning that apps not specifically designed for BharOS that are installed may not work properly.
• The demands of users are also not going to help the case for BharOS as Google has India in an iron grip when it comes to the digital ecosystem.
• Six or seven years ago, Indian users were demanding Android devices but with the increase in penetration and use of Google services on Android, this has changed.
• Now users demand Google services and if a device does not have them, it is very unlikely that users will buy it.
• This is very similar to what happened to Huawei when it was no longer able to install the Google Ecosystem on its devices.
• Despite fantastic hardware at a good price, its share still fell off a cliff.
• Hence, I think that the only real chance that BharOS has is to become a secure and completely controllable OS that is used by government or companies to ensure the security and integrity of their services and data networks.
• Entities will also be able to ensure what is and what is not installed on their devices which will further increase BharOS’s appeal in the government and enterprise segment.
• However, this means that volumes will be low as I suspect that this will go nowhere with the consumer.
• This is because it is already much too late as Google has already conquered this market and users will not move unless they can take Google with them.
• Shots at the Indian consumer digital ecosystem have already been taken a couple of times (see here) and realistically only Jio Platforms has any chance of success with the consumer.
• This strategy involves using Meta Platforms’ and Google’s capital to increase penetration using Google and Facebook services but to then offer other services that they do not offer alongside them to entice usage, differentiation and revenues for Jio Platforms.
• Hence, I think BharOS will disappear into the world of enterprise software and I don’t expect to hear very much about it from here on.
• I do not see any threat on the horizon to Google’s dominance in India and should its share price continue to be hit with ChatGPT speculation, I would look to pick some up.

• Jio Platforms is redoubling its efforts to capture the Indian market for new digital services while ceding the traditional ecosystem to Google and Facebook.
• The real loser here is Kai OS which was the software and ecosystem that was on the original Jio Phone but it has now been replaced with an optimised version of Android 10.
• The new device is called the Jio Phone Next which is believed to be targeted to have a price point of less than $50.
• The only way that it is possible to make this price point and still offer a decent user experience is to “optimise” Android which in reality means to fragment the platform.
• Essentially what Google has done with Jio is create a slimmed-down version of Android that will run very well on lower-cost hardware in a clear contravention of everything it forces the Android handset makers to sign up to when they license Android from Google.
• Support for high-end hardware, features, and so on will reduce the memory, storage, and processing power required to run the device with an acceptable level of performance which is how one can achieve the price point.
• I suspect that the switch from KaiOS (which was non-android) with a KaiOS app store to Android is all about Google maintaining the means of app distribution.
• This makes Jio phones proper Google Ecosystem devices as opposed to KaiOS ecosystem devices that can also run Google apps.
• Being Android-based means that the much wider range of apps on Google Play will also run on the devices although a large number of them will have very poor or no performance given the constrained hardware that they are running on.
• This is the foundation upon which Jio intends to build with its content, commerce, and messaging services which I suspect will soon become much more.
• When one looks at what Jio offers and what I suspect it is planning to offer, none of it competes directly with either Facebook or Google.
• This makes sense as both Google and Facebook have invested substantial amounts of money in Jio Platforms which they would have been less likely to do if Jio Platforms was going to compete directly with them.
• The closest competition is YouTube and Jio Cinema / TV+ and while these are both aimed at Media Consumption, the nature and monetisation of the content in both instances are very different.
• In fact, I do not expect Jio Platforms to compete very much on the Digital Life Pie at all and instead, I think it will concentrate on other services where Google and Facebook do not really operate.
• This will include things like content sales, e-commerce, financial services, e-health, education, and so on.
• These are services where the usage of the device for Digital Life services opens the door to offering other uses of the smartphone to the user.
• Using Android rather than KaiOS will make it easier for Android developers to ensure that their services are also available on Jio Platform’s devices.
• This will eliminate any disadvantage real or otherwise that Jio Phone owners might have felt that they had in using a KaiOS device upon which not all Android apps were available.
• Creating low-end Android devices has been tried many times before and it has never worked, but this time Google is much more deeply involved and it is only on one device initially.
• Hence, the aim now will be to entice feature phone users (such as KaiOS) to become smartphone users which will enable a better user experience and also open up the possibility of Jio Platforms expanding outside of India.
• Jio Platforms currently has 426m users which is more than enough to create a thriving ecosystem supported by Facebook and Google but large numbers of these are inactive and the ARPU is very low at $1.85 a month.
• This looks encouraging on the surface but the real issue is going to be the price of the device as Android devices with this kind of price point have historically offered awful performance.
• This is where fragmenting the Android platform may help as the software can be optimised for this price point but if it breaks too much compatibility, the ecosystem will suffer.
• This is the balance that Jio Platforms needs to strike but seeing as it now has Google in its corner helping it to fragment the Android platform, perhaps this time cheap Android might work.
• Given the $58bn valuation ($145 per subscriber) at which Google and Facebook invested in Jio Platforms, it needs to be a smashing success.
• If things stay the way they are, Google, Facebook et al will be waiting for 350 years to break even.

• The banning of Chinese apps in India has created a convenient vacuum for which there is a great opportunity for Jio Platforms to fill.
• The Indian government is serious about blocking Chinese apps and has moved to block another 47 apps that were little more than mirrors that were attempting to get around the blockade.
• This means that my original view that the blockade was created as a bargaining chip (see here) was too dovish and that in fact, India means business.
• This move to block any workarounds is a sure sign of that and this creates a great opportunity for the local players to finally get in on their home market.
• Back in 2014, companies like Micromax (see here) tried to create their own suite of Digital Life services in order to capture the sudden wave of first time Internet users on cheap Android phones.
• Unfortunately, they did not execute well at all, leaving the door open for Google and Facebook to spread their own ecosystems widely through the Indian market.
• Today, this battle is largely over with Google and Facebook controlling most of the Digital Life services that users enjoy on their devices.
• However, behind this, there is another opportunity which the Chinese refer to as O2O or offline to online services.
• These are offline services that move online and include things like commerce, health, agriculture, education, transport and so on.
• The example of Tencent and Alibaba demonstrates that emerging markets are far more fertile ground for these sorts of services than developed markets.
• This is due to the quality of the offline experience in emerging markets which is way below that which is on offer in the developed world.
• This means that a mediocre digital experience in emerging markets offers a vast improvement over offline (and will be very popular) which is not the case in developing markets.
• This is why QR codes have worked for payment in China but have been a total failure in the West.
• This is what the Chinese were aiming at because their own experience shows that O2O can be a larger revenue opportunity than the Digital Life services that drive usage on smart devices.
• This opportunity is currently closed off to the Chinese and I think it is exactly what I think Jio Platforms is aiming at.
• Google and Facebook are major shareholders indicating that a replication of Digital Life services in India is not the plan.
• Having Facebook and Google onboard will help Jio Platforms as the services will be optimised for the devices that Jio offers with its services making a better ecosystem experience all around.
• Services like WhatsApp and Google Pay will also be used to facilitate the transactional elements of the services that it offers.
• The trick now is to come up with the O2O services that Indians will adopt in droves and this is where the risk lies.
• I suspect that Jio Platforms will be taking most of its cues from China where this has succeeded
• Now that China is effectively blocked from the Indian market, there is a window of opportunity for Jio Platforms to ensure that a regulatory barrier becomes a market barrier.
• Jio is in pole position to dominate the O2O market in India, which is what the investors have paid for, but now it is all down to execution which is always the most difficult bit to get right.
• This is one to keep an eye on especially if there is a separate listing outside of the large Reliance Industries group.

• Jio Platforms now has both Facebook and Google as investors indicating that Jio’s strategy is not to create a digital ecosystem of its own, but instead to offer a series of India specific services to take advantage of the shift to digital.
• Google will invest $4.5bn for a 7.7% stake in Jio Platforms bringing the total raised to date to around $20bn representing a sale of approximately 33% of the company.
• The investor list now includes Google, Facebook, Qualcomm, Intel, Silverlake and a series of other financial investors all of whom have invested at a valuation of around $58bn.
• This price values each of Jio’s 400m subscribers at $145 which given that India is a low GDP/capita market will take some time to earn a return on.
• In the financial year to March 2020, Jio Platforms generated $9bn in revenues from 387.5m users ($1.96 per user per month) and around $1.9bn in EBIT or around $0.41 per user per month.
• These figures indicate that the new investors in Jio are counting on massive growth in new services in order to earn a return because at this rate they will be waiting for 350 years to break-even.
• This raises the question of the market’s capacity to pay more to Jio Platforms, given the low GDP per capita and I think the answer is to be found in what the Chinese refer to as O2O.
• These are offline services that move online and include things like commerce, health, agriculture, education, transport and so on.
• The example of Tencent and Alibaba demonstrates that emerging markets are far more fertile ground for these sorts of services than developed markets.
• This is due to the quality of the offline experience in emerging markets which is way below that which is on offer in the developed world.
• This means that a mediocre digital experience in emerging markets offers a vast improvement over offline (and will be very popular) which is not the case in developing markets.
• This is why QR codes have worked for payment in China but have been a total failure in the West.
• India with its 1.3bn population and 400m middle class offers a similar opportunity to China albeit at a smaller scale given that its GDP per capita is only just over 1/5^th the size of China’s.
• Given that Google and Facebook are now major shareholders and between them, they cover 90% of the Digital Life Pie, it is not Search, Media Consumption, Instant Messaging and so on that Jio Platforms will be going after.
• Instead, it will be focused on the other things that Indian users can do with their phones over and above the digital ecosystems that have driven them to adopt digital in the first place.
• This is not really about increasing economic activity but instead is focused on making exiting activities easier and more enjoyable creating a shift in value from the offline economy to online.
• Between them, Alibaba and Tencent have a market cap comfortably over $1tn and if Jio Platforms can create just 1/5^th of that, it will offer its shareholder a very nice return.
• Having Facebook and Google onboard will help Jio Platforms as the services will be optimised for the devices that Jio offers with its services making a better ecosystem experience all around.
• Services like WhatsApp and Google Pay will also be used to facilitate the transactional elements of the services that it offers.
• The trick now is to come up with the O2O services that Indians will adopt in droves and this is where the risk lies.
• I suspect that Jio Platforms will be taking most of its cues from China where this has succeeded far beyond anyone’s expectations.
• Jio is in pole position to dominate the O2O market in India, which is what the investors have paid for, but now it is all down to execution which is always the most difficult bit to get right.
• This is one to keep an eye on especially if there is a separate listing outside of the large Reliance Industries group.

Africa warning as India falls into Google’s thrall. 

• Google is moving consolidate its growing grip on the Indian market and unless rivals act quickly, there will soon be nothing left.
• Furthermore, Google’s tactics in India is a sign of what it is to come in Africa providing a warning for those intending to address that market.
• Google’s coverage of Indian railway stations with free WiFi has past 100 stations up from 52 at the end of Q3 16 and is well on its way to 400.
• Just a few years ago, India was a reasonably open market but the failure of the local players to act (see here) allowed Google to grab the market and I see it being just one step away from its goal.
• Several years ago, buyers of smartphones in the Indian market would ask for Android such that it was difficult to sell a device without a picture of the green robot on it.
• Now, users have moved one step on and are demanding devices with Google Play just like users in developed markets.
• This puts the handset makers on the backfoot as while it is easy to make an Android device, to get Google Play, one has to jump through all of Google’s hoops.
• This means that in addition to Google Play, one has to install Google’s major services, put them front and centre on the device and set them by default.
• Having apps and services pre-installed on the device and set by default has long been known to be a big driver of usage.
• This is even the case even if the service is inferior as is the case with Apple Maps.
• Consequently, once Indian users move from demanding Google Play to using, enjoying and demanding Google Services then there will be very little that any competitor can do.
• I see India being close to this tipping point now.
• I think that the EU will force Google to unbundle Google Play from the rest of its services (see here) (as it did with Microsoft) which could cause Google problems in distributing its services to users. .
• However, if Google can migrate users from demanding Google Play to demanding Google Services then this remedy will effectively have been neutered as Google will no longer have to enforce the bundling of its services with Google Play in order to generate usage.
• This is why I think Google is rolling out free Internet in India as fast as it can and why it was keen to stop Facebook from getting a grip on the Indian market (see here).
• I think that this should also serve as a warning shot to anyone who is intending to develop an ecosystem in Africa.
• Africa remains one of the last reasonably untapped market where users are largely ignorant of any Digital Life services.
• I suspect Google intends to repeat its Indian strategy in Africa giving any domestic player a relatively short window in which to act.
• I continue to prefer Microsoft, Tencent and Baidu over Alphabet and Alibaba.

In India, Google and Facebook’s rivalry is clear.

• India is one of the last remaining Internet wildernesses and in this market, Google is comfortably ahead of its arch rival, Facebook.
• India has 1.3bn people where only 35% of the population (462m) have access to the Internet.
• It is further complicated by being a huge country with 22 official languages and 150 dialects that are widely spoken.
• For global companies like Alphabet, Facebook, the BATmen (see here) and so on, whose revenues are based on user numbers, this is an important market to conquer.
• In this regard, Google is way ahead of all of its competitors and in particular, has been able to keep Facebook from getting real traction.
• Google’s strategy has been to begin with Android and it has cleverly managed to move user awareness from the Android software to its app store Google Play.
• 4 years ago, Indian shoppers would clamour for an Android device but now they have become more sophisticated and are demanding Google Play.
• Much to the dismay of Indian handset makers, this has meant that they have been effectively forced to produce Google Ecosystem devices, leaving their own Indian ecosystems (see here) to wither and die on the vine.
• The next stage for Google is to increase the number of users that have access to the Internet as these users will almost certainly use Android and Google’s services.
• In this regard Google is offering free WiFi at 24 railway stations with the intention to expand to 100 by year end and 400 in the medium term.
• Following on from this, Google intends to launch its Internet balloons (Project Loon) to offer free access to Indian users but it must get past the regulator first.
• This is where Facebook came a cropper as its Free Basics service was blocked by the Indian regulator on the grounds of net neutrality giving Google a free pass.
• RFM research indicates that it was lobbying by Alphabet-funded advocates that was largely responsible for Free Basics being blocked by the Indian regulator.
• In reality none of these services are really free, as whichever company provides the “free” service will see the traffic flowing through its servers and be in a position to monetize it. (RFM Law of Robotics No. 3).
• The revenue generated per user will be a tiny fraction of what it is in developed markets, but there are so many potential users (4bn), that the total revenue opportunity is worth chasing.
• It is through this strategy as well as expanding its coverage of the Digital Life pie to 80% instead of the 35% it has today that Facebook can become a $40bn revenue company compared to its current $20bn.
• If it is successful, a lot of this is likely to come from taking traffic from Google, which is why Google must press its advantage before Facebook can regroup in India.
• I see this as just the opening salvo in a battle that is going to play out over the next 5 years to determine which ecosystem will be the biggest of them all.
• Google has the initiative in India at the moment, but Facebook has none of the problems that Google has with its ecosystem (see here) and is not yet under threat of EU intervention.
• Consequently, there is everything still to play for.
• When it comes to investing, Google looks fully priced for world domination whereas I continue to think there could be a lot of upside in Facebook once short term expectations have been reset (see here).

Jolla is to Intex what Cyanogen is to Micromax.

• Jolla has received another shot in the arm from a deal that it has struck with Intex for Sailfish to be the heart of Intex’s strategy to create an ecosystem upon its devices for the Indian market.
• This is very similar to what Micromax announced in October last year using Cyanogen (see here).
• However this has really yet to see the light of day as the Micromax Yureka and Yuphoria are predominantly Google ecosystem devices consigning any Indian specific services into the background.
• In essence the Micromax “Bollysystem” does not seem to have an Indian specific experience to it making this all about Google, consigning Micromax to a commodity.
• Whatever the outcome, Sailfish has one huge advantage over Cyanogen as Google has no presence on Sailfish meaning that the experience can be all about India rather than Google.
• This is exactly what Jolla and Intex are aiming for as the announcement goes hand in hand with announcements with Times Internet and Snapdeal.
• Times Internet is a leading provider of digital media for the Indian market while Snapdeal is an ecommerce provider.
• While this will help Sailfish offer greater coverage of the Digital Life pie for Indian users, there remains an awful long way to go and here Jolla is very weak.
• It now has a store with native Sailfish apps and it can run 100,000 Android apps on its platform but the situation is far from ideal.
• Android and iOS now have over 1.3m apps available and Android apps that run on Sailfish do so through and emulator rather than native which will create issues around performance compared to Android.
• Jolla will make its money by taking a share of any revenues generated from Digital Life services within the ecosystem which is exactly the model that Cyanogen has adopted.
• Jolla and Intex are the underdogs here as Intex is No. 2 in the Indian market and Cyanogen has $80m in the bank which I suspect is something like 20x what Jolla has.
• However, when it comes to the creation of the “Bollysystem”, Jolla and Intex are going in the right direction in ensuring that Google is completely excluded.
• India is virgin territory where most people have never used Google services and therefore do not demand them in a mobile device.
• In fact I think that in India the Android brand is far stronger than Google’s.
• Consequently, selling devices with Google services is in fact seeding the market on Google’s behalf and will make it much harder to establish a successful ecosystem focused on the local market (see here).
• While Jolla and Intex have got the strategy right, it remains to be seen whether they are able to execute on this strategy as neither are currently market leaders.
• Furthermore, the lack of a thriving third party ecosystem on Sailfish is going to be a problem when selling this proposition to users who often enter a mobile phone shop with Android on their minds.
• Intex shipped 2.0m smartphones in Q1 15A compared to Micromax’s 3.2m, giving it a reasonable chance of success as long as it puts the full weight of its resources and distribution behind this idea.
• An experiment at small scale is almost certain to fail.

Using Google as a stop gap likely to have a disastrous effect.

• Many players are using Google as a stop gap in India while they get their own ecosystems ready but this sets a dangerous precedent.
• I believe that there is a rising danger that the Indian market may end up as another Apple / Google duopoly with very little value being created for the home grown companies.
• As developed markets become increasingly saturated, the ecosystems are looking to emerging markets to keep the growth going and India is a prime target.
• Although, China is a more mature and higher value market, only Apple really has a chance there as its proposition is not dependent on its services.
• In China, Google has big problems as its services are almost entirely prevented from operating on the mainland meaning that its ecosystem is virtually non-existent.
• Consequently, Google has turned its eye to India which already has 941m mobile users but is only just getting going when it comes to smartphones.
• Google is pushing hard with its Android One reference design and it is getting plenty of help from the handset makers, Xiaomi, Micromax and Cyanogen are all helping.
• India is virgin territory when it comes to users as the vast majority of all users will only access the Internet from a mobile device.
• This means that at the moment they have no ecosystem preference or legacy attachment from the fixed Internet.
• The problem for Xiaomi and Micromax (both of whom have ecosystem ambitions of their own) is that they are currently seeding the market with Google services.
• Micromax was supposed to be developing its own ecosystem (Micromax Yu) powered by Cyanogen’s software on its devices but it looks like a lack of technical readiness has forced it to use Google Mobile Services instead.
• In a similar vein, Xiaomi, whose Chinese ecosystem (MIUI), is not relevant in India is also using Google in India.
• I think that this is highly damaging to their ambitions
• This is because they are encouraging users to discover and to begin liking Google meaning that by the time their own offerings are ready, users won’t want to switch.
• This leaves Micromax, Xiaomi and any other Android handset maker in India with the prospect of being a commodity in what is likely to be the most price competitive market of all.
• Hence, the only winner here is Google, which is in a good position to grow its ecosystem and earn greater revenues from monetising user data.
• Consequently, the outlook for a home grown ecosystem in India is looking increasingly precarious, leaving Apple and Google to reap most of the benefits.
• Google and Microsoft remain my two top choices in the digital mobile ecosystem.

The first Indian ecosystem launches. It won’t be the last.

• India’s second biggest handset vendor has launched a new line of devices resplendent with a new user experience, paving the way for the first Indian ecosystem.
• The first device in the series will be available in December but as of yet there is no word on the device itself or its price.
• Yu Televentures, a subsidiary of Micromax has been working with Cyanogen to produce a custom version of Android that replaces all of the Google Mobile Services (GMS) with those belonging to Micromax and deemed relevant to the Indian market.
• Cyanogen has taken the Android Open Source Package (AOSP) and implemented a custom user experience as well as a few services aimed at the Indian user.
• The devices are being launched under the “YU” brand and will be sold through online mechanisms not unlike Xiaomi.
• The initial target is tech-savvy Indian users as the devices will also be provided with bootloader access making them easy for the users to upgrade with the software that they want rather than that which the operator decides to provide.
• Upon this platform, Yu Televentures will eventually provide a full suite of Digital Life services targeted at the digital activities of Indian smartphone users.
• Here I suspect that the Digital Life services required will be roughly the same as they are in developed markets, but they will need to be adapted for the local taste and focus primarily on Bollywood content.
• This is essentially a replication of the Xiaomi business model in China and underlines how difficult Xiaomi is going to find life in India.
• I think that Yu Televentures already has many of the media rights that it needs to populate the content part ecosystem with some music and movies whereas Xiaomi appears to have none.
• Furthermore, licensing content in India is a painful and labyrinthine task and I suspect that Xiaomi will end up going with Google’s ecosystem in this market.
• Google’s ecosystem is global and will have no real local customisation to appeal to Indian users.
• This is a logical move from Micromax as the development of an ecosystem is the only way in which the company can hope to differentiate its products and earn anything more than a wafer thin margin in the long-term.
• Indian ecosystems are likely to start with pure content (iTunes-like) and then move onto apps and services as they mature. (Just as they did in China and in developed markets).
• However, developing an ecosystem that users love and will pay for is a massive and difficult task but if YU has the content already sown-up, it will have bought itself some time.
• Micromax is the first of the Indian makers to jump into the ecosystem. It is very unlikely to be the last.
• As in China, I think that the Indian players will have an advantage in their home market.
• Hence, I continue to be very cautious regarding Xiaomi’s ability to gain meaningful share or make any money in this hyper-competitive market.