Ronnie05's Blog

Indian Telecom: The tide seems to be turning and the industry is maturing

Posted in Industry updates by Manas Ganguly on May 13, 2013

Reliance Q1, 2013 results possibly holds out light to the beleagured Indian Telecom Industry in terms of the business case. It signals the end of hypercompetitive era (and operator bleed), end of consumer sops (change of direction to quality of acquisition), increasing data revenue (that was inevitability catching up), Eco-system consolidation across Operators, ISPs, VAS providers and building alliances and emergence of EVDO +GSM devices.


1. RCOM has reported today 7.2 million 3G subscribers and 29.4 million data connections for the quarter ending March 31, 2012, and a 21% increase in data traffic quarter on quarter.
2. RCOM increased tariff’s by 20% on both GSM and CDMA. Reduced promotional offers by 65%, and are reducing discounted plans.
3. RCOM is trying to create a healthy ecosystem, forging relationships with leading global plans, and entering into exclusive partnerships with social media networks. RCOM has tied up with leading handset manufactuers for CDMA smartphones. RCOM entered into an exclusive arrangement with Lenovo. Phones will be attractively priced and work on CDMA and GSM, allowing switching calls between the two, based on the strength and quality of the signal.
4. There is also an exclusive partnership with Google, and RCOM announced partnerships with Whatsapp, Twitter in India. Twitter and RCOM has launched a Reliance Twitter access pack.
5. RCOM will move 9500 employees to partner roles.
2G is inking GSM Intracircle roaming arrangements. The first such agreement is with Aircel. These will increase RCOM’s national 2G footprint by 10,000 base stations. All other agreements will be completed by the second quarter of this financial year
6. The RCOM-Reliance Jio deal. Jio will utilize fibre across RCOM’s intercity fibre optics network. IT will have reciprocal access to Reliance Infocomm’s infrastructure in the future. This is the ‘first’ such agreement between the two companies (which means that more deals are being discussed).
7. Industry is facing virtual consolidation. Pricing power is coming back, and there are improvements in RPM. RCOM is rationalizing Prepaid tariffs, by removing free minutes and improving tariffs by 20%.
8. Revenue contribution of data- Wireless growth is 2.5%, but the growth of GSM and Data businesses are growth engines. 64% of wireless revenue for RCOM. One year ago, it was 59%, moving up 500 basis points as a contribution of GSM and Data.

Quoting Mr.Gurdeep Singh (President CEO, Wireless Business, Reliance Communication)
We changed course and aligned go to market strategy to as 3G metro, 3G lit markets and non-3G markets, relooking pricing, branding, distribution, and kept the go to market elements differently for all three markets. Quarter on quarter of GSM+Data is going up. We had consciously taken a call that CDMA network will be a high speed data network, by being a dominant player in the dongle market, and make an effort to bring branded handsets into the smartphone market. We will make efforts with HTC and Blackberry, and another few announcements are planned. What’s good about CDMA device ecosystem is that it is CDMA+GSM.
We don’t rule out rolling out EVDO+GSM phones.

The GSM + Data has grown 6% quarter on quarter in terms of revenues. We have been ahead of the industry growth in this segment in the last 3 quarters. We gained 100 basis points in revenue market share, and have an accelerated growth path. A large part of the revenue comes from 2G Internet (GPRS), and in light of some operators who have given up spectrum in some circles, which is increasing opportunity for RCOM in these circles. We’re seeing traction in that direction. GSM+data, the growth will be on data.

We’re not late with the ICR arrangements. Now that the hypercompetitive stage is behind, there is a good reason for us to consolidate our position. We’ll be smart enough to go for revenue corridor, data corridor. We want to get to the market quickly, make a good case to deploy our own assets.

2300 MHz needs far more sites than a 2G footprint, should Reliance Jio have an ambition to be a pan-India operators. Ours is a large portfolio of towers, and many of the towers in the main cities are fibre-ised.

We are in advanced stages of discussions to lease out towers to Reliance Jio.Our objective is to migrate customers to CDMA smartphones in the CDMA segment. We’ve raised prices of CDMA handsets. The attempt is to get a better quality customer. We’ll see the complete bleed stopping in CDMA in the next two quarters. The bleed is coming to a stagnation, and it will contribute as we populate more CDMA smartphone users.Growth in GSM+data will outperform the market.

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