>Reliance Communications (CITI)

INDIA CONNECT

So What Has RCOM Achieved?

• GSM net adds overcome RCOM's offer — GSM net adds (excl. RCOM) for Jan-09

was 9.3m, up from 8.1m in Dec-08. While Bharti’s net adds remained stable at
2.73m, Vodafone and Idea had significant acceleration. The net adds for the GSM
incumbents was strong across various categories (Metro/A/B/C), and even the new
launches (Idea in Bihar/Mumbai, Vod in Orissa, MP) were not affected.

• What's happening in the market? — In Metro/A circles, Bharti/Vod/Idea maintained

or accelerated their net adds. This is intriguing given that RCOM’s offer would
have focused on larger cities/towns initially. Absence of any impact could be due
to (i) incumbents’ gross adds coming from semi-urban/rural areas not covered by
RCOM and (ii) RCOM’s subs coming mainly from dual-SIM owners, which does not
show up as incumbents’ churn as increasing % have lifetime validity. In any case,
churn numbers remain subjective with material variations in reporting policies.

• New launches have weathered the storm too — Vod/Idea accelerated the net adds

in their new circles. Since data in new circles is mostly gross adds, it is quite
encouraging, esp. Idea’s surge in Mumbai in Jan-09 (60% of net adds) despite
being the focus of RCOM launch. While Idea’s reactionary tariffs in Mumbai seem
to have worked, we don’t see any need/motivation to replicate it elsewhere.

To see full report: RCOM