Reliance Communications: Wider Access Points

The company has unleashed an aggressive expansion & pricing plan.

If you know S P Shukla well, chances are that he will be quick to notice the phone you are carrying. If he does not like it for some reason, he will offer to get you another, one of his liking.

Shukla, the president-wireless with the country's second-largest private mobile service provider Reliance Communications, can now easily put his money where his mouth is. Not much of it will be required.

On Wednesday, the company launched the cheapest colour handsets in the world. Priced at a meagre Rs 777, a shade more than the price of three tickets at a metropolitan multiplex, the handsets hit the market at a time when the rest of the industry was still trying to launch black and white handsets for less than Rs 1,000.

Four years ago, soon after starting service, RComm was offering phones for a down payment of Rs 501. But this had to accompanied by a bunch of post-dated cheques that took the total payment for the handset to about Rs 3,500.

For the new handsets, sourced from China's ZTE Corporation, there will be no outgo after the purchase. What's more, the new handsets, though working on the company's pan-India network of code-division multiple access (CDMA), will have a sim card. It will be possible to migrate to another CDMA network, such as Tata Indicom's and keep the handset.

The new handsets, the company hopes, will be instrumental in roping in more subscribers as it increases its geographical presence three times.

Says Shukla: "We will spend a considerable amount to expand our network presence to over 22,000 towns in this year from 9,000. The expansion would be for both CDMA and GSM services".

With the expansion of network, the company will also roll out an array of services. "We have a lot of plans, but cannot reveal them at the moment as our competitors are listening," he says. He would only say that the customer will be in sharp focus.

Regardless, the competitors seem to have drawn their own inferences. One of them, who does not want to be named, believes that RComm is subsidising the handsets. "On a rough estimate," he says, "the company is subsidising at least 25 per cent of the cost. In fact, the total subsidy could be much higher considering that the manufacturer would have provided a discount on the bulk order that RComm has placed."

The subsidy however does not seem to be a cause for worry among analysts. Said one: "The move comes at a time when both the industry as well as the government are trying to increase telecom penetration in the rural and semi-urban areas. Once the company gains loyalty of its new customers, it could always migrate some of them to higher schemes, or sell them more expensive handsets."

RComm now has 34 million subscribers garnered over the last four-and-a-half years. Bharti Airtel, the biggest mobile service operator, has 39.02 million hooked over 12 years. RComm has pegged its capital expenditure this financial year at Rs 10,000 crore, an increase of 33 per cent over 2006-07. The increased figure holds the key to its expansion plans.

At a session with analysts last Monday, RComm chairman Anil Ambani said the Rs 10,000 crore investments would be used for network expansion. This would include 2G, 2.5G, 3G and even 4G rollouts. However, the launch of 3G and 4G services (the third and fourth generation of mobile telephony, which enable high-speed data transfer) will depend on allocation of additional spectrum by the government.