Just like a
fairy tale story once upon a time…. in 2004 -2005 era Reliance communication was the darling of every user in
India. Wow, then what happened; Reliance communications business came to
younger son of Respectable DB Ambani and he
changed the track of the company direction. Reliance was instrumental in
bringing devices to common hand and thought that once user will get habitual
like alcohol then start charging end user. As a smart user, once user stopped
getting the free talk time they moved to other service provider without closing
the existing connection. That led to detoriation of HLR vs. VLR active user % and also impacted the ARPU.
It is really interesting
to observe that Reliance
communications selected CDMA just opposite
of majority of other player and in turn lack of fashionable devices and it also
helped competitor to snatch the remaining user base. The growth rate of Reliance Communication landed at the
lower end as they invested in domain like undersea cable to data center where
the business is capex intensive but global downturn as well as offering of
better value proposition based cloud based solution blocked Reliance
Communications path to prosperity.
In most
recent quarterly report, the user Base came down to 102 mn andARPU is one of the
lowest among peers. They claim to have 34 million
plus data user Base and generating one of the lowest again.
In order to
reestablish itself, they merged with
MTS brand ownerwhere Reliance communications will still hold 90%, on the other side they are talking with Aircel another Indian
service provider reeling under huge debt
plus failed to attract high ARPU userbase.
I am
following Reliance communications for the last 3.5 yearand
every year they come up with one or another punch line that they are going to
sell their tower business and they are in discussions including exclusive
discussion but unfortunately the tiered investor all the time keep on
waiting.
Six months back they
announced that they are on the verge and equity price got the bump upwards and
now they are saying that it will be done post Aircel deal. How they can claim that it will be done post Aircel
deal when Aircel deal discussion just got extended.
In
my point of view,
that equity investor will not buy the point that what is your EBITA and concern
regarding serving of debt but they actually want them to see tower and other
non profitable business to reduce the interest cost and in turn increase the
earning per share.
The current state of Reliance Communications foundation happened
on the day they started giving subsidized device with Reliance communications
connection.
Now they are doing another mistake of forcing more than 6 mn to port to their new network otherwise they are disconnecting
the service. I am sure it is not going to help them as well as take them
anywhere.
It's
a strategy of Reliance communications to stream line the business and then get
acquired or merged with Reliance Jio. We should not forget that how Reliance Jio entered into it indirectly.
