The GSM fraternity managed to sign on 9.3 million subscribers in January despite Reliance Communications’ attractive introductory offer for its new service. All GSM players managed to maintain or improve absolute subscriber additions in January compared with December---on a high base, Bharti added 2.3 million subscribers in January over the same number in December.
Idea cellular trebled its share in the Mumbai market, albeit on a low base. RCom, for its part added five million (including GSM) subscribers during the month, numbers that have both surprised and confounded the market. According to Citigroup, “Although the Indian wireless has never been a zero sum game, we don’t think the market could have expanded from 10 million net additions to 16 million.
This is particularly because RCom’s coverage is not as deep, at least to start with, and it would have competed for subscribers in areas with relatively high penetration. Also the net additions of GSM incumbents were not impacted in the Metro/A/B category circles.” The RCom stock closed 6 per cent lower in Monday’s trading session at Rs 171.15 while the Sensex fell 3 per cent.
Even if the number of subscribers has been high, what’s more important is how profitable they are going to be for RCom. The management has said that users have started recharging after using the free minutes of talk time offered as part of the introductory package. However, what kind of average revenue per user (arpu) and the average revenue per minute (rpm), the telco is clocking remains to be seen.
RCom’s arpus, for the CDMA network, have trended downwards over the last seven quarters and stood at Rs 251 in the December 2008 quarter versus Rs 324 for Bharti. Thus, RCom’s arpus have tended to be lower than those for the market leader. Idea Cellular, which launched its service in Mumbai a few months back, saw a sequential rise in arpus in the December 2008 quarter.
Also, whether users of Reliance’s CDMA network have moved over to its GSM network remains to be seen because industry watchers point out that high-end user may not be averse to switching over to the GSM network even if it means buying a new handset.
