Reliance Communications Company Snapshot Reliance Communication is the flagship company of Anil Dhirubhai Ambani Group (ADAG).

Established in the year 2002 with a vision of ushering in digital revolution in India it has ensured telecom service availability to common man at affordable rates. Since its inception it has grown at a furious pace and has become the second largest telecom company in India with a subscriber base of around 70 Mn. It is the largest CDMA operator in the country with annual profits of Rs 54 Bn on revenue of around Rs 188 Bn. The company has a market share of 17.7% and has recently launched its GSM operations making it the only operator to present in all the telecom circles in both the technologies. The company has around 80 Mn subscribers and serves individual consumers, enterprises, and carriers, providing wireless, fixed, long distance, voice, data, and internet communication services through a number of operating subsidiaries. It has recently launched its DTH operations as well. Reliance Communications is ranked among the top ten Asian telecom companies. Its corporate clientele includes 600 Indian, 250 multinational corporations and over 200 global carriers and owns and operate worlds largest IP enabled connective infrastructure. It has laid 150000 kms of fibre optic cable systems in India, USA, Europe, Middle East, and the Asia Pacific region. The multi-channel customer delivery system of the company consists of 2000 exclusive retail outlets. It also reaches its customer through 5000 distributors and 1 Mn retailers. The company employs 20000 employees out of which there are a 5000 strong sales force to cater to the customers at their premises. The businesses of Reliance Communication are divided into 3 business units each of which are headed by a President. The President then reports directly to the Chairman.

Winning Strategy: 1. Dual network presence with the launch of GSM service acts a positive catalyst. Reliance with its presence in both the technologies will be benefited immensely. The industry adds around 8 10 Mn GSM subscribers every month. With the pan India aggressive rollout which the company has embarked on, it could garner a significant chunk of the new subscribers. Since the ARPU of GSM operations have always been on the higher side the margins of the company in the future will improve. Table: Customer churn probability due to launch of GSM operations Current Technology CDMA GSM Potential Future Technology GSM Reliance GSM Probability Low Likely. If tariffs are lower

With the GSM rollout, the company expects an increase in the market share to 20.3% which is an increase in 2.5% in a single year. 2. Leadership position in enterprise and global data services business in high margin business. The enterprise side of the business in India is underserved and there is a huge potential for growth. RCOM is well placed in this segment with >50% market share in high growth data products like IDC, VPN etc. The Global business unit clocked a decent 26% yoy growth led by a strong 39% yoy growth in MOUs. The business comprises of NLD, voice and data services and is $290 Bn business with margins in the region of 40%. Reliance on account of its strong optic fibre backbone across various continents accounts 30% of the ILD market.

Cautions: 1. Continuous decline in ARPU and MOU. Traditionally the ARPU for CDMA operator has always been lower compared to GSM operators. However in the case of Reliance, the ARPU as well as MOU has been showing a decline of 11% every quarter Table: Decline in ARPU and MOU of Reliance over the last 5 quarters ARPU MOU 1Q08 375 510 2Q08 361 490 3Q08 339 449 4Q08 317 430 1Q09 282 424

But at the same the ARPU of Airtel declined only by 7% and it was around 368. Generally the decline in ARPU is associated with the increase in MOU, but in case of Reliance both of them are declining. Increase in the subscriber additions at a faster pace compared to decrease in ARPU wont be reflected in lower margins at present. However with the markets stabilizing it would have an impact on the earnings of the company Conclusion: Going forward the company will witness a strong growth in the revenues. The GSM launch will lead to increase in subscriber base in the short term but is unlikely to increase the revenues initially. The companys global voice and data services business would continue to be strong and retain its leadership position. The companys focus in this segment would be beneficial as it is high margin business unlike the domestic wireless segment.