Analyst Commentary

• Reliance is teaming up with Google to push mobile data services.
• This will help further the operator's strategy of "personalisation, rich content, simplicity and affordability" in this space, while also encouraging greater 3G uptake, which accounts for around 2% of its mobile customer base.

Today we focus on three developments:

• Reliance to Push Android Devices: Reliance Communications and Google have announced that they will work together to promote the adoption and usage of Android-based devices in India. The two-year arrangement will encompass new data plans and services enabled by the Android mobile operating system and Google Mobile Services. Reliance Communications will also offer 1-GB of data usage per month, for a limited period, for all Android device users with a 3G plan in India. Among other initiatives, carrier billing, co-branded mobile applications and marketing campaigns are planned.
• M2 Acquires Primus Australia: M2 has announced that it will acquire Primus Telecom Holdings for 192.4 million Australian dollars (USD199.5 million). The deal, which M2 expects to be completed in early June 2012, will enable the operator to cross-sell a range of Primus' next generation voice and data services, provisioned via its metro fibre rings and data centres to its SME customer base. The acquisition also heralds M2's entry into the residential segment, which on a pro forma basis accounted for 32% of the new M2’s revenues in 2011.
• Softbank Taps NSN for LTE: NSN will supply, deploy, and integrate an FDD-LTE network for Softbank in Japan. The deployment of NSN's Flexi Multiradio Base Station will support FDD-LTE as well as the expansion of Softbank's HSPA+ network in the 900-MHz band.

Our Take

Reliance is currently seeing rapid growth in 3G subscriptions and data usage. In its last earnings call, it revealed:

• 2.8 million active 3G subscriptions at the end of December 2011, up from 2.1 million in September 2011.
• 3G data ARPU of 500-600 Indian rupee (USD9.47-11.37) per month.
• Average 3G data usage of 800-MB to 1-GB per month.

The free 1-GB of data will primarily aim to get more customers on to post-paid and pre-paid 3G subscriptions. This bundle, Reliance hopes, will illustrate the tangible benefits of mobile internet access to consumers and encourage their loyalty to the operator. Reliance and Google have yet to provide details on their specific plans, but these should help further the operator's strategy of "personalisation, rich content, simplicity and affordability" in the mobile data space. Unlike iOS/iPhone. Android can cater to a broad spectrum of affordability in terms of device cost, which should fit well with the Indian market, where 3G is still at a nascent stage and there are a wide range of income levels. Currently, non-voice (SMS, mobile internet, content and other services) accounts for some 20% of Reliance Communications' mobile service revenues and the operator plans to double this contribution within 3 years. Currently, 3G subscriptions account for some 2% of Reliance Communications' mobile customer base.