Reliance Communications’ new 4G-led wireless strategy may not bring results for the struggling telecom operator as a majority of its customers are on the 2G network, and are still using feature phones. These customers have very low monthly spending and little willingness to invest in a 4G-ready smartphone, according to a report by Goldman Sachs, which also said that RCom had average revenue per user (ARPU) of Rs. 58 per month in the first quarter of the ongoing fiscal, which was the lowest in the industry.
RCom’s ARPU is over 50 percent lower than the industry average, as compared to the industry’s average ARPU of Rs 130-140.
The Anil Ambani-led telecom operator recently said that it will shut down its 2G wireless network, a move which is most likely to help incumbent telcos like Bharti Airtel and Vodafone that have been focused on acquiring new customers. Reliance Jio, on the other hand, has been focused on acquiring high paying customers as it plans to turn operations profitable in short-term.
RCom had a total subscriber base of 81 million, of which 13 million were wireless broadband — 3G and 4G users — as of July-end 2017, according to data published by Telecom Regulatory Authority of India. The US-based brokerage said, “We see little merit in a telco running a pan-India network to support only about 13 million subscribers.
The telecom operator has been losing subscribers since 2015 when it did not renew its 900 MHz spectrum in five service areas, namely West Bengal, Assam, Bihar, Northeast and Odisha. It was using the spectrum for 2G services. It lost 95 percent of its subscribers in five service areas.
In case RCom completely shuts down its wireless business altogether then such a move will reallocate its revenue market share equally among top operators. Due to this move, the FY19 revenues of Bharti Airtel, Idea Cellular, and Reliance Jio could increase two, three and four percent, respectively, the note said. RCom had revenue market share of 3.3 percent in the first quarter.
“We expect incumbents, especially Bharti and Jio, to continue benefitting from consolidation at the tail-end of the market,” the brokerage said.