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RCOM Q3-FY12 Concall Live: RIL Deal? On Why Data Usage Went Up, PostPaid Focus


We’re reporting live from the Reliance Communications conference call, for its quarter ended 31st December 2012 (Q3-FY12), where it reported that data usage on its network has increased by 29.38% to 22,512 terabytes, a 3G subscriber base of 6.1 million users, and 28 million data subscriber base.

1239: High speed data coverage in over 1300 towns. 6.1 3G customers, over 22,000 TB of data traffic.

1240: The exit of some players has opened up new opportunities, and with some players exiting some markets, will help bring back the pricing power in the industry. Telecom industry is under pressure, but the impact of these pressure points varies as per operator. There is likely to be pressure on many operators P&L due to abolition of national roaming. These have bearing on all sectors, and impact on RCOM will be lower. As some of these disparities are removed, it will be a level playing field. Refarming of spectrum, RCOM will focus on execution on the ground rather than reconfiguring our network. Industry needs to focus on enhancing revenue. Net additions across the industry have reduced, and reduction in channel commissions. Price hike is imminent. RCOM has modest incremental payment obligations, so we have better pricing power, and this will help improve the value of the business.

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Future revenue growth opportunity: around 600 million active users, and we expect an addition of 300 million more users in India. We expect data to contribute 40% of incremental revenue, driven by drop in prices of smart phones. This is a great opportunity for RCOM. Our networks are built for the Internet.

We have adopted a spectrum based go-to-market strategy: 3G states with 900 MHz circles, Metro circles, and non 3G circles. We have taken initiatives, including retail engagement, and will do a brand refresh. We started focusing on retail engagements to increase reach and enhancing channel strategy. We have a common recharge platform for GSM and CDMA. A series of e-retail and retail partnerships were set up. we’ve reorganized our organization structure – leaner, meaner and more empowered retail team. We will deploy systems to analyse customer usage in real time, to support application based charging. We are concentrating on reducing utility costs.

As far as our CDMA network is concerned, we are concentrating on device agnostic high data usage, who have higher ARPU and high usage. We intend to dominate both large screen and handheld devices. We will be introducing branded CDMA handsets. Partnerships provide customer stickiness to smartphone users.

1250hrs-1256hrs: global business data being shared.

1257hrs: Q&A begins

1258hrs: Question: Revenue has not grown for data services, but usage and subscriber base has increased?

Answer: Data growth is not linear, because of an adjustment in the 3G price. The offtake is encouraging,and we should see a faster jump in revenues. In terms of CDMA auction, AUSPI has highlighted the weak CDMA ecosystem. Government has slashed CDMA auction prices by 50%, but AUSPI has said it wants a further reduction.

1301hrs: is RCOM open to signing a deal at a discounted prices deal with RIL?

Answer: At Reliance Infratel, we are in advanced stages for an infrastructure deal with three operators.

1304hrs: We’ve reported a growth on MoU quarter on quarter. In early January, we took a correction in tariffs, on special tariff vouchers and promotional tariffs, circle by circle. With the alignment of the traffic to these changes, we’ve seen revenue increase. On margins, we took a one time cost on account of a ICC sponsorship.

1305hrs: How much could be the total increase in RPM given the changes in January?
Answer: There are two things happening – there’s a virtual consolidation in the industry, and we’re moving towards 5 pan-India operators. For a long time, we have been working in an inverse direction to inflationary pressures. Going forwards, with increase in inflation, tariff hikes will be implemented. Over the next 12-18 months, we see 2-3 opportunities that a tariff hike will take place. The industry can see a 6-8 paise RPM jump over 12-18 months. We should see 2-4 paise RPM improvement in the next 2-3 months.

1313hrs: All the changes done in September and in early January, should see an RPM increase of 2-3 paise. Postpaid is encouraging now. We have been focusing on improving our postpaid marketshare now that GSM business is stabilising. Our objective is to gain a disruptive share of the postpaid business, because this has mostly been with three players.

1318hrs: Uninor is a 6 circle opration. Docomo has given up 3 CDMA circles. Even the players who want to remain regional, have to pay new spectrum costs. There will be greater sense and sensibility across operators, and the price hike story is less likely to be derailed.

We’ve invested significantly on the transport and backhaul for the Internet. Right of way costs can be as high as Rs 1 crore per km.

1321hrs:
Question: What proportion of minutes is from special tariff vouchers?
Answer: Varies from circle to circle, and for RCOm it is from 30-60% depending on the circle. For the industry, varies, it could be higher for other 50-70%, and the mix of the customers.
Question: What about DoT’s one time fee?
Answer: We’ve only received it for GSM, and only for the Bihar circle. We will continue to evaluate our options.

1325hrs: One of the reasons for the access charge impovement is that we’re seeing an increase in off-net calls, which is good, because that means that the quality of customers is improving.
Non voice revenues are 20.9%, and a large part of this is coming from Data, from 3G, 2G Internet and CDMA dongles.

Tariff hikes are inevitable.

1335: In prepaid, in a per second pulse, we have the highest tariff. On the postpaid, the 25% pie is with the three top operators, and we will be a challenger in that segment, while not being a challenger in the prepaid anymore. Our networks are designed for Internet, and the opportunity is in Delhi, Mumbai and Kolkata, where we see an opportuntiy to get postpaid back to RCOM.

The market is absorbing a 2million smartphones, increasing by 25% CAGR. 3-4 years from now, when non-smartphones will be less available, and we’ll see a faster adoption smartphones, and more choices.

1339: Our spectrum refarming is from 2015 end.

(we’re updating this post. Keep checking back)