Reliance Communications will soon enter into the postpaid GSM business, for which they have started mass media advertising for the first time. The company has plans of launching corporate offerings and utilizing its cross leveraging with its data card business.
New offer launches in the roaming business, strong brand positioning, selling its own equipments and handsets will add to RCOM’s advantage. Taking this discussion further, we believe the company is well poised for the launch of 3G, as wireless business of RCOM functions on EDGE platform and the cost required for converting an EDGE network to 3G is estimated to be lesser than the cost required for other companies to convert their 2G network to 3G. In this fashion, RCOM is expected to save a lot in 3G deployment.
We also believe the impact of MNP will be felt lesser on RCOM, as the company has a huge chunk of low end GSM customers, who may switch to another operator even before MNP is implemented. As far as CDMA business is concerned, the management believes that MNP will require changing of handsets if a CDMA customer wants to switch to GSM. This will make customers reluctant to change their networks. Nevertheless, we believe the cost of retention per subscriber will increase post MNP, which may impact margins up to some extent.