>Reliance Communications (MERRILL LYNCH)

Good news, but not enough

# Strong sub additions in Jan; pace likely to continue in Feb
Reliance Com reported 5mn new subscriber additions in Jan ’09, the first
subscriber reporting since the Co’s nationwide launch of GSM services. While the
CDMA-GSM split of RCom’s Jan additions is not yet available, the numbers mark
a strong improvement vs the Co’s ~1.8mn net adds (CDMA & GSM) in Dec ’08.

# No visible impact on adds of other operators – a surprise
From an industry standpoint, a key surprise to us is that none of the other
operators have reported any slowdown in their net adds for Jan '09 despite
stronger growth by RCom. While exact numbers for the industry are awaited, it
seems like the wireless industry added ~15mn subs in Jan '09 vs ~11mn in Dec
'08. This market expansion is surprising to us given that RCom’s early stage GSM
coverage would be mostly in towns where other operators already have coverage.

RCom revises up prices; coverage expansion to help
RCom has reportedly revised up the price points of its promotional GSM offer
from Rs25/subscription to Rs49/subscription plus a mandatory recharge voucher
of ~Rs50-60. The promotional/free talk-time has also been cut to ~Rs4 per day
versus Rs5-10/day earlier. The upward price revisions will likely taper RCom’s
subscriber additions over next 3-4 months but any immediate impact on Feb net
adds is unlikely due to the Co’s expanding network coverage on GSM. By end-
Jan, RCom offered GSM services in ~14000 towns vs ~11000 towns at the start.

To see full report: RCOM