Reliance ADAG Chairman Anil Ambani has announced plans to file for an initial public offering for its tower subsidiary Reliance Infratel, the exact time frame is not known. In February 2008, he first announced plans to file for an IPO (Red Herring Prospectus available here) but it was put on hold due to the economic slowdown, according to Business Line.
Now, Reliance ADAG is readying the new prospectus to submit to Securities Exchange Board of India (SEBI). Infratel will offer 10% of its equity to investors upon the IPO. RCOM shareholders will continue to own 85% of Reliance Infratel following its IPO, Ambani said at the company’s annual general meeting, where he also spoke the performance of Infratel, RCOM and the outlook. Excerpts from Ambani’s speech:
The De-merger & Consolidation Of OFC
Our decision to demerge was guided by the need to keep ourselves asset-light, improve our return on equity and create value for our shareholders.
In July 2007, we divested 5 per cent of Reliance Infratel for about Rs. 1,400 crore, generating capital gains of over Rs 1,200 crore for you, our shareowners. This deal attributed an equity value of about Rs. 27,000 crore to the company, amounting to Rs. 135 for every share of Reliance Communications.
The recent transfer of optic fiber assets to our subsidiary, Reliance Infratel, has brought our entire passive infrastructure portfolio under one entity, enabling an efficient organizational structure from both customer acquisition and organizational cost perspectives. (Reliance Communications shareholders approved the demerger of the Optic Fiber Division of RCOM to Reliance Infratel in May).
- At the time (2007), we had barely 15,000 towers in our portfolio. Today, we have three times that number at over 48,000 towers — and increasing. We have now added 35,000 towers over the last two years.
- At the time, we utilized barely 20,000 tenancy slots on our multi-tenancy towers. Today, the occupancy on our towers stands at around 75,000, a number that is set to more than double in the next three years, driven both by our own internal requirement and that of a large number of new and existing operators.
- In FY 2008, we had a revenue of Rs 1,500 crore. In FY 2009, that revenue has gone up by over 200 per cent to Rs 5,000 crore. In the same time period, the net profit has expanded by 400 per cent to touch Rs. 1,700 crore.
We expect the demand for passive telecom infrastructure to more than double in the next couple of years.
Business From New Telcos
We are benefiting from the infrastructure requirements of new entrants in the sector who are setting up their networks. We host the telecom electronics of a growing number of other operators on our towers, including Etisalat DB, S-Tel, Aircel, Tata Teleservices, MTS and others.
In July this year, we signed a long-term, infrastructure sharing agreement with Etisalat DB valued at over Rs. 10,000 crore for a minimum period of 10 years. Under the agreement, we will provide a wide range of services, including passive infrastructure and transmission services. Last month, we concluded an agreement with another new operator S-Tel, to provide it telecom infrastructure in 6 operating circles.
Reliance’s GSM Network Roll Out; Tapping Synergies Between GSM and CDMA Networks
During the previous year, we rolled out our nationwide GSM wireless services in a record time. The project was concluded in a span of barely 11 months. Both these networks operate on common, technology-independent infrastructure including telecom towers, network connectivity, long distance infrastructure, sales, distribution and retail network, back-end call center and BPO support. Apart from cutting the time-to-market of our GSM launch, this has also enabled us rationalize our capital expenditure significantly, making the new network profitable from Day One, in line with our existing wireless profitability.
RCOM Subscriber Additions
As on March 31, 2009, we had 73 million subscribers on our wireless network, which has further increased to 85 million subscribers at present. We added 27 million subscribers during FY 2009, an increase of over 51 per cent. We are among the Top 2 wireless operators in the country.
Reliance Mobile added about 23 million subscribers in the eight-month period from January to August, representing 21 per cent share of the net subscriber additions across the industry. Currently, we rank among the Top 5 telecom companies in the world by number of customers in a single country. By the end of this fiscal year, we look forward to acquiring our 100 millionth customer.
Pre-paid User Base, MoU
As before, pre-paid subscribers contributed most of our growth. We added over 26.7 million prepaid subscribers in the last financial year, representing over 99.5 per cent of our wireless subscriber growth. Our subscribers consumed over 27,000 crore wireless minutes nationwide last year.
No Significant Spend On Advertising?
A consumer product launch in our country, even on a scale smaller than in telecom, is usually supported by advertising spends running into hundreds of crores of rupees. Our innovative and unconventional strategy used airtime minutes as a highly effective currency to launch our nationwide service without any significant spend on advertising and promotions.
Coverage: Our network now covers over 24,000 towns and over 600,000 villages. This includes coverage of 95 per cent of all rail routes and highways in the country, traversing well over 270,000 kilometers.
PCO Business: We have an undisputed leadership in the PCO segment, with over 2 million call offices across the country.
Fixed Wireless Phones: We bring connectivity to the homes and offices of over 6 million subscribers across the country on Fixed Wireless Phones.
On VAS: We are the largest provider of value added services in the country. Reliance Mobile World allows our wireless subscribers access to the most comprehensive range of VAS applications and over 200,000 content titles on their handsets. Related – Sachet VAS: RCOM’s Daily Pricing Strategy; Effect On ARPU
Rural JV With Kribhco: This joint venture will aggressively market our telecom products and services, giving us greater distribution power in rural areas. The next big wave of subscriber growth in India will take place in the rural hinterland. Our pioneering initiative in reaching the rural subscriber in his own backyard will yield long-term value. More on the tie up on Medianama.
On 3G & WiMAX: We are currently evaluating our participation in both the 3G and WiMAX auctions, which are scheduled to take place towards the end of this year.
Other Services: We see significant opportunities across a range of businesses from mobile value added services to enterprise IT, from long distance voice and data services to Internet data centers, from consumer broadband and, home entertainment to telecom retailing and related businesses.
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