Why RCom will continue underperforming its peers - Firstpost

New Delhi: Reliance Communications is gradually lowering its dependence on lower end pure play CDMA customers. In the March quarter of FY13, the GSM and data customers together accounted for 64 percent of the company's wireless revenues, which means almost two-thirds. And this was a 500 basis point increase over the contribution of GSM and data customers in the same quarter a year earlier. So naturally, RCom is gradually succeeding in either migrating lower end CDMA customers to GSM or a mix of GSM and CDMA. But despite making such smart moves, RCom's wireless EBITDA grew 2.5 percent on quarter to Rs 12,300 crore. Reuters But despite making such smart moves, RCom's wireless EBITDA grew 2.5 percent on quarter to Rs 12,300 crore as wireless traffic grew 2.3 percent on quarter. But RPM, or revenue per minute, was flat at 44 paise. So are initiatives like upgrading customers, pushing data services, hiving off promotional minutes and freebies actually helping RCom? In a conference call with analysts, CEO Gurdeep Singh explained that migration of the company's entire customer base to headline tariff of 1.5 paise per second was completed only in the last quarter. And that the impact of the recent decision to withdraw freebies and lessen promotional offers will be felt in the coming three-four months. RCom increased tariffs by 20 percent on both GSM and CDMA and reduced promotional offers by 65 percent besides also curtailing discount plans since April. "The combination of the two decisions will help harden RPMs," Singh said in the conference call with analysts. He also explained that there are as many as sic lakh 'abusers' on the RCom network who together eat up 4,000-5,000 minutes of talk time each month. "These users typically use the 6-9 month plans and we have made changes to such plans. We don't mind losing such customers so they will be out of the system." Besides generating high-end GSM customers, RCom is also continuously moving to increase growth in data traffic. The company reported 29.4 million data users on its network last quarter of which 7.2 million were 3G customers. It said total data usage across the network was up 21 percent. But analysts remain unimpressed with RCom's performance. BNP Paribas' Kunal Vora said in a note to clients that RCom's wireless revenue increased by 2.3 percent quarter on quarter when Idea Cellular's growth was 8.7 percent and Bharti's India and SEA growth at 2 percent. RCom's minutes growth at 2.3 percent was lower than Idea (8.5 percent) and Bharti (5.1 percent). EBITDA margin for the wireless segment was flat, compared with improvement for Idea and Bharti. "Growth in minutes was seasonal but RCom's performance lagged peers and RPM was flat despite the 20 percent headline tariff increase in Q4. We believe RCOM to continue to underperform Idea and Bharti given pressure on its CDMA business and the difficult business case for new entrants in GSM. Data is showing promise, and potential tower and other deals with RIL are likely to remain key stock drivers." So RCom needs to do a lot more to improve RPM. via Technology - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNEjGeTaLb4zh4o4muRVk3FJkIKR_A&url=http://www.firstpost.com/business/why-rcom-will-continue-underperforming-its-peers-777551.html

Put the internet to work for you. via Personal Recipe 2598265