RCOM’s strategy to pull back free minutes has impacted growth in traffic volume, but we believe this should improve going ahead. Its wireless revenue was up 2% q-q, driven by a 2% q-q increase in minutes. In comparison, Airtel and IDEA saw 5-8% q-q
minutes growth. Some 65% of the revenue mix is from GSM and mobile data, where growth is healthy, and RCOM believes it has stemmed the decline in its CDMA business. It is in the process of converting its CDMA network to data network to support higher levels of data usage.
RCOM added 2.4bn minutes in the quarter, implying 2% q-q growth. In contrast, Airtel and IDEA added 11-12bn minutes, hence recorded growth of 5-8% q-q. RPM remained flat for all the three players, although RCOM’s absolute number of 44p was ahead of Airtel’s and IDEA’s 41-42p.
Data metrics appear to be improving, with 1.1mn 3G net adds and a 21% increase in data traffic sequentially. 3G customers stood at 7.2mn (6.1mn in 3Q) and total data users were at 29.4mn (27.6mn in 3Q). Usage/sub currently is up 14% q-q to 319MB.
RCom on tariff Hike
RCOM raised its prepaid tariffs by 25% across GSM and CDMA in 2Q13. It once again increased its prepaid tariffs by 20% across India on both GSM and CDMA platforms and cut down promotional minutes by 65%. According to RCOM, on average, the industry has 25-45% customers on headline tariffs. According to the company, some consumers are in periodical plans and it will take 3-4 months to migrate customers to new tariff plans.
Management believes the industry has excess capacity on passive infrastructure, and the company is in discussions with other operators to roll out its planned 10K 2G base station expansion and RCOM has pre-invested in back-haul capacity. Management reiterated that peak capex has already been spent and INR15bn will suffice for FY14.