Reliance Communications’ GSM coverage is almost at par with CDMA coverage – currently, RCOM is offering GSM services in ~22k towns and ~400k villages (CDMA presence in ~23k towns and ~500k villages). Reliance Infratel the Tower company had a tower portfolio of ~48k towers in March 2009.
Management indicated that post the phase-out of initial promotional schemes, customers are increasing usage and recharging beyond the free minutes. ARPU is thus gradually normalizing; further scale-up in usage is expected over the next few quarters.
Overall ARPU is expected to downtrend with greater rural penetration and competition. 3G is expected to drive growth of VAS and over the long term, uptake of VAS could help to stabilise or even improve ARPU.
RCom’s Take on 3G:
Incremental capex for 3G is not expected to be substantial since it will be an overlay on the existing 2G infrastructure; management indicated most cell sites are 3G ready. We understand, the auction price will, therefore, be the key to determining returns; the risk of over-bidding remains in the metro/tier 1 locations, if spectrum availability is limited.
3G is expected to provide a fillip to VAS, which could help to stabilise/improve ARPU
over the long term.
