Unified licence fee may delay Reliance Info break-even

Reliance Infocomm's break even may be pushed back by a few months owing to the additional burden from paying the entry fee for unified licence.

Senior company executives said that the Rs 1,500 crore entry fee paid for migrating to the unified regime will affect the company's bottomlines and therefore it may not be able to break even by the year end.

Reliance, which has so far invested nearly Rs 15,000 crore in the telecom business, had earlier said that the company would break even within the first year of its operation, a feat which would have been unmatched in the capital intensive telecom sector.

Cellular operators which had begun operations five to eight years back have begun to break even only recently.

A Reliance spokesperson maintained that the company was on track financially. Company sources said subscribers were being added though Reliance was offering roaming through call forwarding facility.

"Full mobility, no doubt gives some advantage to the company's business. However, the entry fee which is about 10 per cent of our investments, will pinch the bottomline," a company source said.

He, however, added that the company was now focusing on rolling out its services aggressively which included expanding the network coverage into more towns and tariff cuts.

Merchant bankers close to the company said that though the growth in subscribers base may balance the outflow of Rs 1,500 crore, declining tariffs will also have to be taken into account.

"Even if we assume one million new subscribers a month with an average revenue of Rs 500, it amounts to an incremental revenue of Rs 50 crore a month," said an analyst.

Reliance, at present, has over 4 million subscribers most of whom are on the Rs 501 Monsoon Hungama plan where even the handset has been given on a two-year installment basis.