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Reliance Communications to refocus on CDMA, hikes investment to Rs 2,000 cr

Tuesday, 6 May 2014 - 7:05am IST | Place: Mumbai | Agency: dna

Reliance Communications (RCom), India's fourth-largest telco, is focused on rejuvenating its CDMA business, which has seen headwinds in the last few quarters.

As per Vinod Sawhney, new CEO, wireless business of RCom, "Three key steps we have taken to boost CDMA growth are introduction of GSM+CDMA smartphones in the market, putting together a dedicated CDMA team of the mobility business and upgradation of EVDO network to Rev-B in non-3G circles. CDMA should add to growth of Rcom on the back of improved universal chipsets and handsets ecosystem."

To further enhance its CDMA network, besides increasing 3G roaming agreements, and initiaing tower expansion (RCom added 10,000 sites in 2014 under these sharing agreements), RCom is also increasing its investment from Rs 1,500 crore in the last fiscal to Rs 2,000 crore in the current fiscal.

RCom is now also pushing for a disproportionate share of the GSM+CDMA handsets business by making data plans more affordable, offering more bundles services and entering into more exclusive partnerships with social networking sites – expected to take off in a big way in the next two weeks.

The company now has 26 CDMA handsets that are identical to its GSM handsets which are seeing some traction, and while less than 8% of users now use multi-mode handsets, them still being priced at $260-270, the company expects the cost of such handsets to fall to $100-120 by the second half of this year, and by the next year, all devices over $70 are expected to be multi-band – catering even to entry-level handset users.

Gurdeep Singh, CEO, consumer business, RCom, said, "Fourteen months ago, we crafted our dual-band strategy, and as the only pan-India telco today offering services on GSM and CDMA, we have captured a fair share of the CDMA business. Besides, on a global level, too, we see more users moving to multi-mode, multi-band chipsets and universal handsets, and this is the time for us to really milk the power of dual-SIM technology and we will stay invested in this business."

He added, "The zero-plan bundled offer with brands like Apple, HTC and Nokia has contributed to growth in higher ARPU customers in large cities – especially Delhi and Mumbai where we are hugely MNP positive, and 17 companies in Mumbai and Delhi have moved to the Apple plan, and this is expected to increase Rcom's share of high-value postpaid customers."

RCom will also capitalise on its relationship with Reliance Jio to use its sites or convert ICR agreements with other operators to its own network by increasing capex, after Rcom builds enough traffic using this partnership. This is part of the company's smart-capex strategy, to improve operational efficiency and cash flows with minimum capital expenditure, and affordable tariffs for customers.

The three deals with Reliance Jio for towers, inter-city fibre and intra-city fibre has helped to reduce some of the debt in the quarter, and in all the partnership is expected to reduce RCom's current debt of Rs 40,178 crore by Rs 3,000 crore over the term of the contract. RCom has already delivered 30,000 towers to Reliance Jio, and is expected to deliver on the rest of the agreements over the next 3-4 months.

Selling a majority stake in Reliance Globalcom, is also expected to reduce RCom's debt by another Rs 10,000 crore.

Another step RCom is taking to improve its post-paid users, which will also help the company improve its revenue per minute and average realised rates, is by increasing both headline and baseline tariffs (by removal of free and discounted minutes from the network), which will continue to be a regular feature to bring back profitability, pricing power and offset rising inflation and spectrum costs.

RCom management continues to believe that data will be the next growth driver, given the huge potential growth that India has for data – with currently 220 million wireless data users, but only 43.2 million wireless broadband users – with penetration of less than 25% for 2G and less than 5% for wireless broadband. Industry experts also predict data revenues to grow from Rs 12,000 crore to Rs 36,000 crore by 2016 with an 85% estimated CAGR.

RCom reported 37.4 million wireless data users in the March quarter – with 34% of them being 3G customers and total 3G subscribers standing at industry-highest level of 13 million, growing at 16.2% in the quarter. RCom is expected to see more 3G partnerships in the next 2-3 months to expand its network. However, the company is still evaluating the recent TDSAT verdict lifting the ban on 3G ICR, even as its peers, Bharti Airtel and Idea have announced re-starting of its cross-country 3G roaming services.

Interestingly, at a time when most industry experts believe voice business is declining, Sawhney believes the voice market still has room to grow. "Currently the industry has 500-550 million unique users, including dual-SIM users with visitor location register (VLR) of 86.4% and rural India penetration of 40%. Thus there is scope for addition of at least 200 million new voice subscribers," he says.

On its participation in the upcoming 2G auctions next year to renew its spectrum coming up for renewal in certain 'C' circles. Singh said RCom was evaluating its strategy, but would take all steps to protect subscriber interests.

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