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RCom’s lack of data investments starts hurting growth

rcomReliance Communications Ltd reported disappointing results for the June quarter on a steep decline in voice usage, but the company’s voice pricing is now more or less at parity with that of Idea Cellular.

However, in the absence of data growth, the company was not able to report impressive numbers for the first quarter.

Net profit fell to 176.6 cr from 227.5 cr in the previous quarter, while total revenue fell to Rs 5541 cr from 5,703 cr in the previous quarter.

The problem lay in a steep decline the amount of voice minutes that each user consumed.

Against 330 minutes per month in the previous quarter, RCom users consumed only 316 minutes during Q1.

Part of this is expected as monsoon months tend to be busy months for rural areas as farming activity picks up.

However, other operators managed to report growth with the help of discount schemes and promotions and with the help of data growth of 15-18% quarter on quarter.

RCom, on the other hand, did not seem to have given any special offers as its average revenue per minute (voice billing rate) did not report a drastic decline as was seen in the case of Idea Cellular and Bharti Airtel.

Average voice price fell marginally to 32.8 paise from 33.2 paise in the previous quarter. In Idea’s case, for example, voice price fell to 32.9 paise from 33.9 paise in the preceding quarter.

While poor voice growth was seen in other operators’ reports also, in case of Reliance Communication, the company has not been able to compensate that with data growth.

RCom has not been investing in its 3G network for almost two years now.

The number of 3G sites continued to remain static at 11,659 — while others have reached 40,000-50,000 sites.

This meant that total number of 3G customers increased only marginally to 17.6 mln from 17.9 mln over the three months.

However, there was brisk increase in the number of 2G data customers and 2G data consumption. As a result, total data traffic went up by 6.4% to 92.8 bln MBs.

This is higher than Idea’s 62.7 bln MBs. In fact, Idea Cellular has 33,621 3G towers, showing how RCom is generating much of its data revenue from its CDMA network.

All this, however, is expected to change over the next 12 months as RCom starts rolling out its 4G network in most of the states in India.

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