Anil Ambani’s Reliance Communication Shifts Focus to Balance Sheet

Reliance Communications Focus on FinanceVoice realizations continue to inch up across the Indian Wireless sectors due to a combination of reduced discounting and tariff hikes. Encouragingly, this increase in calling rates has thus far not resulted in any significant adverse usage elasticity.

In the prepaid segment, RCOM is following the industry and has cut discounts and raised tariffs. However, it intends to compete aggressively in the postpaid segment where it has both 3G & CDMA spectrum and can offer voice and high-speed data services. Overall, the company’s current focus is on profitability (more than growth) and deleveraging Balance Sheet.

RCom believes that capex will remain low. The company has signed up ICR agreements with Tata Tele, Vodafone, Aircel, and Loop, which has helped it expand its footprint by ~10k sites. These contracts entail usage-based payments, with cost-per-min set at about the same level as for RCOM’s own towers. The company intends to monitor the usage patterns on these sites for next 1.5-2yrs and convert them to owned sites as usage rises.

Reliance Communication recently raised data rates for both 2G and 3G by ~25%. This was done to have 2G data price parity with the GSM incumbents that had recently raised their tariffs.

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