RComm scales down capex to Rs 3k cr for FY 11

Reliance Communications Ltd. | Telecommunication - Service Provider | Telecom | BSE: 532712 | NSE: RCOM

19 May 2010 Evaluate

Reliance Communications 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. The amount will be mainly used for network upgrade and subscriber acquisition.

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.

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, the drop in tariff was not offset by increase in usage.

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