RPG Cellular draws up expansion plan

By K. T. Jagannathan

CHENNAI, MAY 15. Cell phone service provider in Chennai RPG Cellular has drawn up a Rs.85-crore two-phase expansion programme which will see its installed switch capacity go up to two lakh subscribers by the end of the current financial year.

Out of the Rs. 85 crore outlay, close to Rs. 35 crores will be funded through internal accruals. The balance will be financed by ICICI. According to Mr. Satya K. Srivastava, Vice-President (Finance), RPG Cellular has been holding parleys with the lending institutions to get the loan at favourable rate.

According to Mr. Dilip R. Mehta, Managing Director, the first phase of the current expansion plan will be completed by July. By then, the installed switch capacity will have gone up to 1.30 lakh subscribers from the existing 75,000. The first phase expansion, expected to involve an investment of Rs. 50 crores, will also see the number of base stations go up to 93 from the existing 48.

RPG Cellular has already penned an agreement with its vendor Ericsson to provide the requisite switch and network for the expansion programme.

RPG Cellular had since inception invested close to Rs. 180 crores in the venture. Last year alone saw an investment of Rs. 40 crores to beef up the switch capacity to 75000 subscribers from 30,000. The initial investment of Rs. 140 crores comprised capital expenditure, cash loss, entry fee and the like.

Mr. Srivastava says RPG Cellular has been in talks with lending institutions to swap the high cost debt with low cost one now that the interest rates have come down substantially. If this fructifies, this will fetch a saving of 4 to 4.5 per cent in interest cost for the company, he feels.

The company has ended March 31, 2001 with a gross revenue of Rs. 123 crores and a net profit of around Rs. 15 crores.

The expansion is seen as a proactive move by RPG Cellular to take on expected increase in competition following the impending entry of couple of more players into the field. According to Mr. M. Padmanabhan, Vice-President (Marketing), the company has brought down entry barriers by reducing deposit rate from Rs. 3,000 to Rs. 2,000. ``Far from being viewed as an elitist product, cell phone is now positioned as a mass product,'' he says, giving a clue or two to RPG's marketing plan.

The company has also increased its retail network from 500 to 1500 over period. The introduction of short messaging service and bringing down air time rate on a par with those offered by MTNL in Delhi have all been a proactive initiative taken by RPG Cellular to expand customer base. Mr. Mehta is convinced that the name of the game in the coming days in the cellular field will be volume. And, that will largely depend on quality of service, brand name and sales and distribution network, he says.

Send this article to Friends by E-Mail

Section  : Business
Previous : Healthcare sector poised for big leap: CII
Next     : Biggest software park coming up in Pune