New Delhi: India’s second biggest mobile phone company by subscribers, Reliance Communications Ltd, or RCom, plans to procure more than 60 million GSM phone handsets worth more than Rs3,000 crore over the next three years, as it prepares to launch its GSM-based phone services by March 2009.
“RCom plans to procure around 20 million GSM handsets every year, and sell them across 3,000 retail outlets owned by the company,” said a person close to the sourcing deal, but did not wish to be identified.
“These handsets could cost anywhere between Rs500 and Rs700 (each), depending on whether they are bundled or sold stand-alone,” he added.
A senior executive with a handset maker chasing the contract said RCom has already started talks with vendors including LG Electronics Inc., Samsung Electronics Co. Ltd, Huawei Technologies Co. Ltd and Fly Mobile Ltd.
GSM, short for global system of mobile communications, is a popular platform for offering phone services in India, the world’s fastest growing market for mobile phones.
The GSM market serves 75% of about 200 million mobile customers in India, and adds about 8 million users every month. RCom, a part of the Reliance-Anil Dhirubhai Ambani Group, has already received the licence and radio spectrum for offering GSM-based phone services in the country.
An RCom spokesperson declined to comment on the handset contract.
The company is in discussions with equipment makers to procure networking equipment and switches worth $5.6 billion (about Rs23,800 crore) for rolling out a countrywide GSM network, as reported by Mint last year.
India’s market for telecom switches and networking equipment is worth Rs45,000 crore annually, according to the Telecom Equipment Manufacturing Association. This excludes the telecom handset business, which is worth Rs23,452 crore, according to research firm IDC India Ltd.
Naveen Mishra, an analyst at IDC India, said RCom could use bulk procurement as a tool to bring down handset costs. “RCom gives the specifications and promises assured business to the vendors, which helps in negotiating a good deal,” he said.
“In fact, RCom was the first operator to start bundling of handsets with new phone connections, which brought the entry cost for new users to as low as Rs700.”
By procuring handsets in bulk and bundling them with new connections, RCom plans to compete with rival Bharti Airtel Ltd, which serves more than 60 million subscribers through GSM technology.
Currently, more than 87% of RCom customers are serviced on networks running on code division multiple access, or CDMA, technology.
Reliance Telecom Ltd, a unit of RCom, already runs a relatively-small GSM-based operation—with some 5 million customers—in eight of India’s poorest states.
With three new telecom operators including Datacom Solutions Ltd (the telecom subsidiary of Videocon Ltd) and Unitech Ltd seeking to roll out GSM phone networks, the market for telecom equipment including handsets is expected to grow at more than 30%.