Reliance Communications (RComm) has allocated Rs 3,000 crore as capex for the financial year 2010-11. This amount is phenomenally lower than its last year’s capex which stood at Rs 10,000 crore, given its launch of GSM services.
Capex for FY11 is over and above the 3G capex of the company which it did not comment about. “We are looking at investing around Rs 3,000 crore next year. The amount will be mainly used for network upgrade and subscriber acquisition. Our peak 2G network investment is behind us,” said RComm group MD Satish Sheth.
The capex plan of the company is in line what the company’s chairman Anil Ambani said last year at its annual general meeting. “RComm’s capex would decline significantly starting this year and continue on a downward trend in the future, particularly in relation to the scale of our expanding operations,” he had said. “Over the last two years, the company had committed substantial investments in its business, rolling out the largest network expansion of its kind in the world in a record time, said Ambani.
Recently, Idea Cellular also announced a capex (network and non-network) of Rs 3,000 crore for the ongoing financial year. “This does not include any payouts on account of 3G auction and 3G capex,” said Idea CFO Akshaya Moondra.
In a hyper-competitive telecom market, sharp drop in tariff is supporting growth in minutes of usage. However, growth in minutes is still not resulting into increase in revenues. RComm in 2009-10 had resorted to sharp tariff cuts by launching three variants of its ‘Simply Reliance’ scheme. However, as per company expectations, the drop in tariff was not offset by increase in usage.