Reliance Infocomm

"Our strategy is to make money on scale, not from skimming the

market," Anil Ambani said.

1
 ACKNOWLEDGEMENT

I would like to thank from deep of our heart our esteemed faculty Dr.

Madhvendra Mishra for providing me with a rare combination of

professional expertise and personal touch. It would have been impossible to

complete our paper on such a big group without his valuable suggestions and

able guidance. It is hard to envisage the problems i would have faced

without them.

I would also like to thank all other persons who helped us on various

occasions and kept our morale up and things going.

KANIKA ARORA(MBA200514)

2
 ABSTRACT

Reliance Infocomm offers a complete range of telecom services, covering

mobile and fixed line telephony including broadband, national and
international long distance services, data services and a wide range of value
added services and applications that will enhance productivity of enterprises
and individuals.
Reliance IndiaMobile, the first of Infocomm's initiatives was launched on
December 28, 2002, the 70th birthday of the Reliance group founder, Shri.
Dhirubhai H. Ambani.
This marks the beginning of Reliance's dream of ushering in a digital
revolution in India by becoming a major catalyst in improving quality of life
and changing the face of India. It aims to achieve this by putting the power
of information and communication in the hands of the people of India at
affordable costs.
RIC is currently offering its wireless services in 1,100 towns and cities
across India.
In January 2004, Reliance Infocomm (RIC) acquired 100 per cent of the
undersea cable company, FLAG Telecom for US$ 211 million through
Reliance Gateway Net Limited, a wholly owned subsidiary of RIC.

Reliance WebWorld : Reliance's strategy of vertical integration

Reliance WebWorld is the retail interface initiative of the Infocomm

juggernaut and a part of Reliance's strategy of vertical integration.

3
 INDEX

RELIANCE GROUP
VISION
MISSION
FACTS
RELIANCE INFOCOMM PLANS AND IMPLEMENTATION
STRATEGY TO PROMOTE INFOCOMM
VALUE CHAIN
TECHNOLOGY
ENTRY STRATEGIES
MARKETING STRATEGY
STRATEGY OF SINGLE PLAN
STRATEGY OF Delayed-Launch
PREPAID STRATEGY
PORTER’S FIVE COMPITITIVE FORCES
SWOT:
TIEUPS AND ACQUISITIONS
CABLE AND WIRELESS
FLAG Telecom
CRITICISM ON STRATEGY ADOPTED BY RELIANCE

4
RELIANCE GROUP

ABOUT

The Reliance Group was founded by Dhirubhai H. Ambani is India's largest

business house.
Total revenues : Rs 99,000 crore
Cash profit : Rs 12,500 crore
Net profit : Rs 6,200 crore
Exports : Rs 15,900 crore

Reliance Group revenue is equivalent to about 3.5% of India's GDP. The

Group contributes nearly 10% of the country's indirect tax revenues and over
6% of India's exports. Reliance is trusted by an investor family of over 3.1
million - India's largest. Every 4th investor in India has Reliance shares.
Reliance is the only Indian private company to make the Fortune 500 list of
the world’s largest corporations

FACTS
Some facts about Reliance Group:

5
Company Profile

The Reliance Group founded by Dhirubhai H. Ambani (1932-2002) is

India's largest business house with total revenues of over Rs 99,000 crore
(US$ 22.6 billion), cash profit of Rs 12,500 crore (US$ 2.8 billion), net
profit of Rs 6,200 crore (US$ 1.4 billion) and exports of Rs 15,900 crore
(US$ 3.6 billion).

The Group's activities span exploration and production (E&P) of oil and gas,
refining and marketing, petrochemicals (polyester, polymers, and
intermediates), textiles, financial services and insurance, power, telecom and
infocomm initiatives. The Group exports its products to more than 100
countries the world over. Reliance emerged as India's Most Admired
Business House, for the third successive year in a TNS Mode survey for
2003.

6
On December 28th 2002, Reliance Infocomm created a history by connecting
more than 600 cities by a 60,000 Km Tera-bit capacity optical fiber cable.
The total Capex for Reliance Infocomm was expected to be around 25,000
Cr but it was soon revised to 18,000 Cr. This fall in the capex was attributed
to the fall in the international telecommunication equipment prices. Till
2003, around 9600 Cr of this capex is spent and the rest is expected to be
spend in the next 18 to 24 months.
Reliance Infocomm offers a complete range of telecom services, covering
mobile and fixed line telephony including broadband, national and
international long distance services, data services and a wide range of value
added services and applications that enhances productivity of enterprises and
individuals.
As per the equity structure of Reliance Infocomm, Reliance Industries (RIL)
and the Ambanis hold 45 per cent each with employees 10 per cent equity.
Reliance India Mobile, the first of Infocomm's initiatives was launched on
December 28, 2002, the 70th birthday of the Reliance group founder, Shri.
Dhirubhai..
Reliance Infocomm wishes to extend its efforts beyond the traditional value
chain to develop and deploy telecom solutions for India's farmers,
businesses, hospitals, government and public sector organizations.

Vision

"We will leverage our strengths in executing complex global-scale projects

to make leading edge information and communication services affordable by
all individual consumers and businesses in India. We will offer unparalleled

7
value to create customer delight and enhance business productivity. We will
also generate value for our capabilities beyond Indian borders while
enabling millions of India's knowledge workers to deliver their services
globally".

Mission

"Make the tools of infocomm available to people at an affordable cost, they

will overcome the handicaps of illiteracy and lack of mobility", Dhirubhai
Ambani charted out the mission for Reliance Infocomm in late 1999.

Corporate Philosophy

The corporate philosophy that reliance Infocomm follow is short, simple and
succinct - "Think big. Think differently. Think fast. Think ahead. Aim for the
best".

Idea behind Reliance Infocomm

"Make the tools of Infocomm available to people at an affordable cost, they

will overcome the handicaps of illiteracy and lack of mobility", Dhirubhai
Ambani charted out the mission for Reliance Infocomm in late 1999.

Growth

Working at breakneck speed, from late 1999 to 2002, Reliance Infocomm

built the backbone for a digital India - 60,000 kilometers of fiber optic
backbone, crisscrossing the entire country. The valuation of Reliance

8
Infocomm, the telecom and convergence major of the Reliance group, has
been pegged at about Rs 60,000 Crore (roughly around $13 billion), even as
six major private equity investors are understood to be in the race for a 10
per cent stake in the company. Presently Reliance Info has 8.5 million
subscribers, taking the post-paid and pre-paid subscribers together. The
company expects to hit the 10 million subscriber mark by September, and 15
million by March 2005. The company achieved a break-even in September
2003, and ended fiscal 2004 with a small net profit. Reliance Industries has a
current market capitalization of about Rs 80,100 crore. Reliance Infocomm
closed a $300 million syndicated term loan with a final maturity of seven
years, in the company's first international borrowing. This is the largest
international debt to be raised by any Indian telecom company, The
company will have to pay 1.7% plus Libor in the first year for the $300
million loan.

Alliances:

1. Reliance Infocomm and Intel join hands to accelerate the Internet

revolution in India. Intel powered PCs and laptops to provide users
instant Internet connectivity through Reliance India Mobile and other
wireless products.
2. Reliance Infocomm brings Railway Booking windows to your mobile
handsets
Reliance Infocomm launches Railway Ticket Booking as part of R
World in New Delhi, in association with Indian Railways

9
 • Easy menu driven navigation on R World makes ticket booking
most convenient ...from anywhere, anytime. No need to remember
train names and reservation codes.

• No need to plan your visit to the reservation counter or wait in

queues.

• Use any credit card - Master, Visa, Diners or Amex to book your
ticket and get it delivered at your door step

• Facilities to be extended to other cities in keeping with the rollout

plans of IRCTC

COMPANY ANALYSIS
Reliance Infocomm has US $ 5 Billion investment in state of the art
Infrastructure which
Lead to the explosive growth in Tele-density. It is fully integrated player
with Pan India footprint and has aggressive roll out to capture dominant
market share and create an entry barrier. It uses CDMA 1x Technology and
has received FSP Licenses in 18 Telecom circles. It has First Call Center of
2,000 seats in Mumbai.
It is focusing on following areas:
E-Commerce
Video on Demand
Global Supply Chains
Wireless Voice
Software Revolution

10
 Universal Internetworking
Intelligent Homes
VoIP (Voice over Internet Protocol)
Interactive Television
Unified Messaging
Virtual Reality
Visual Communication
Speech Recognition
Next Generation Corporations
Broadband Portal
Digital Multimedia Library
Continuously Upgradeable Networks
Telecommuting

Reliance Infocomm lacks Transparency at end user level and is not

spreading Technological Awareness. The company is also subjected to the
thefts and forgery regarding Handsets provided by company. It is also
facing many legislative barriers form government as well as its competitors.

New, Effective Marketing Model

Earlier, Reliance had considered appointing channel partners, but dumped

the plan once the DSA idea cropped up. (The DSA(direct sellers
associations) model is applicable only for a few months.) The DSA model
offers several advantages. One, the DSA and his staff can do personalized,
direct marketing—in a manner not achievable by channel partners—at no

11
expense to Reliance. Reports are that DSAs are utilizing all tools like fax, e-
mail, telephone, cable TV network, and one-to-one meetings to tell
prospective customers about ‘Reliance India Mobile’. This is also building
more hype for the service and allowing Reliance to spend a lot less on
advertisement, but more importantly, enabling it to reach out to the
optimally potential audience. From customer acquisition to verification and
validation of the supporting documents, to collection of cheques and
depositing them at the Reliance collection center, DAEs will handle all the
back-end operations. Reliance is thus saved of huge amount of time,
effort and money.

The very appointment of a DSE ensures one connection for Reliance, as

that’s one of the conditions for becoming a DSE. Thus, even before the start
of the service, the company has a base of around 200,000 subscribers,
whereas BSNL was able to get the same number four weeks after the launch
of its CellOne cellular services.

The model neatly combines the best features of the traditional channel model
and the ‘Amway’ model. Reliance gets a ready subscriber base of 200,000
DAEs by default. Moreover, a whole bunch of backend operations is
‘outsourced’ to the DAEs for no fee.

Single-Plan

Initially, the company has opted for a single plan—Dhirubhai Ambani

Pioneer Offer—so as to maximize the impact among subscribers and make
achieving the magical number easier. The uniformity of one plan also helps
customers grasp it easily and make them do a clear-cut comparison with

12
other GSM and CDMA services. This speeds up the decision-making
process of the customer, and in case a wrong decision is made, a 100-percent
buyback allows subscribers to return their phones without any deduction
within three months. Thereafter, an amount will be deducted depending
upon the number of months left. Since there is one plan, it is easier for DAEs
to make a sales pitch and close the deal at the earliest. However, in view of
the high initial investment, the plan offers two schemes—normal and
finance. For the normal scheme, one has to pay around Rs 21,000, while for
the finance scheme; one pays an initial amount of 3,000 and postdated
cheques of Rs 21,600.

The single plan allows better logistics management, which can result in significant
savings for Reliance.

Implementation of the plans

Reliance Infocomm Highlights

1999 The Dream, 1999
"Make a phone call cheaper than a postcard and you will usher
in a revolutionary transformation in the lives of millions of
Indians" - Dhirubhai Ambani
(pic) equation illustration
The Reality, November 15
Reliance Infocomm begins Project Planning
2000 May 10
Optic fibre laying process commences in Gujarat, Andhra
Pradesh & Maharashtra

13
2001 May 1
First Media Convergence Node made "Ready for Electronics"
at Jaipur
2002 January 15
First Base Transceiver Station (BTS) made "Ready for
Electronics"
February 25
Obtains International Long Distance License from Govt. of
India
December 22
Commissions 1st Optic Fibre Backbone ring
December 24
Establishes 1st Point of Interconnect (POI) in New Delhi
December 27
Hon'ble Prime Minister of India, Atal Behari Vajpayee e-
inaugurates Reliance Infocomm
Hon'ble Union Minister for Parliamentary Affairs, Information
Technology and Communications, Pramod Mahajan,
inaugurates NNOC
2003 January 15
Introduces Dhirubhai Ambani Pioneer Offer for Reliance
IndiaMobile service
February 14
Launches Reliance WebWorld in top 16 cities
March 31
Launches International Long Distance Services

14
April 3
Commissions all backbone rings
April 25
Introduces colour handsets
May 1
Launches Reliance IndiaMobile Service commercially in top 92
cities
with one million customers.
June 10
Launches India's first wireless Point of Sale (POS)
July 1
Introduces "Monsoon Hungama" Offer: Instant multimedia
mobile phone and connection for just Rs 501.

Sets world record - acquires one million customers in 10 days

July 3
Launches R Connect Internet connection cable
Aug 26
Introduces Reliance IndiaPhone Fixed Wireless Phone and
Terminal
September 20
"Navratri" a data service in R-World posts a world record of 10
million downloads on the first day of the launch.
September 30
R World clocks a phenomenal 1 billion hits in 1 month
October 6

15
 Launches integrated broadband centre at Reliance WebWorld,
Bangalore
October 24
Deploys pilot of Home Netway in Mumbai
October 30
Reliance becomes India's largest mobile service provider within
7 months of commercial launch
November 3
Customer base touches 5 million
November 12
Migrates to Unified License Regime
November 16
Launches National Roaming
November 21
Launches International SMS to 159 countries launched
December 19
Adds 4500th Contact Centre Executive
Contact Centre becomes the largest such facility deployed by
any single Indian Service Provider
2004 January 12
International wholesale telecommunications service provider,
FLAG Telecom amalgamates with Reliance Gateway, a wholly
owned subsidiary of Reliance Infocomm
February 9
Launches RIM Prepaid with attractive offer - For Rs 3500 get a
Motorola C131 mobile phone and Rs 3240 worth of re- charge

16
vouchers instantly and stay connected for 1 year
February 17
Reliance subsidiary Flag Telecom announces FALCON Project
- a major new Middle East Loop Terabits Submarine Cable
System with links to Egypt and Hong Kong via India
March 22
Reliance Infocomm launches multi-player gaming on RIM
handsets - a first in India
April 05
Reliance IndiaMobile introduces International Roaming facility
to 172 countries, 300 networks
April 23
Reliance Infocomm introduces first ever auction facility on
Mobile phones through R World.
May 27
Reliance Infocomm receives the Most Promising Service
Provider of the Year 2003 (Asia Pacific) award at the Asia
Pacific Technology Awards instituted by Frost & Sullivan.
June 8
Reliance Infocomm introduces World Card - a Prepaid
International calling card for affordable and convenient ISD
calls from India.
July 29
Announces India's First MPLS Global VPN Solution in
partnership with MCI
August 5

17
 Launches the first regional Customer Contact Centre in
Chennai
September 6
Mukesh D. Ambani, Chairman, Reliance Infocomm, receives
Voice & Data "Telecom Man of the Year" award
September 9
Introduces Railway Ticket booking from R World data
applications suite of Reliance IndiaMobile
October 12
Mukesh Ambani voted the world’s most infuential telecom
person by UK-based publication Total Telecom.
October 19
Reliance Infocomm bags the CDMA Development Group's 3G
CDMA Industry Achievement Award for International
Leadership.
2005 January 04
Reliance introduces first e-recharge facility in CDMA in India.
January 24
Reliance IndiaMobile announces mega rural plan to cover 4
lakh villages and 65 crore Indians by December 2005.
June 27
Shri Anil D Ambani is appointed Chairman of Reliance
Infocomm.

18
Present Situation And Future Plans

• The impact of the Infocomm business on the consolidated results of

Reliance Industries Limited for the year ended March 2004 is a loss of
Rs 265 crore (US$ 61 million).
• The Reliance Infocomm team is planning to put these problems
behind and the customer will see a discernible difference.
• Reliance Infocomm is also focusing on service quality and delivery
and our valued customers can expect a substantial improvement in
customer experience in the coming months. With the acquisition of
Unified Access Services Licenses, all legal wrangling is now behind
it.
• Reliance Infocomm is expanding services from about 1,100 towns to
about 5,000 towns in a phased manner, in order to reach un-served
markets. This second phase expansion will result in Reliance
Infocomm services being available to over 100,000 villages.
• On completion of this expansion, Reliance Infocomm will have a
capacity to cater to 40 million mobile subscribers. Reliance Infocomm
will thus be well on its way to achieving a commanding position in
the wireless communication market in India.
• Data applications have been a key differentiating factor for Reliance
Infocomm.
• They will fortify this position further with new data services that vast
sections of ordinary Indians can use, some of which will be in Indian
languages. In this context, a significant ongoing technology effort by

19
 Reliance Infocomm is in Multi-lingual Speech Recognition in ten
Indian languages.
• Reliance acquired Flag Telecom in January 2004. Flag Telecom has a
55,000-kilometer long sub-sea optic fibre cable that connects sixteen
of the world's top twenty businesses centers and reaches 75% of the
world population.
• Flag Telecom will also enable Reliance Infocomm reach out to global
markets.
• Having initiated a digital mobile revolution, the next big initiative of
Reliance Infocomm is in bringing about a broadband revolution in
India.
• Reliance Infocomm is rolling out broadband services on its network
in a comprehensive manner covering all products available in the
narrow to broadband range. For organizations, broadband will involve
access to high-speed connectivity to make transactions efficient,
functions seamless and new economic opportunities abundant.
• For homes, Reliance Infocomm broadband services will bring high-
speed connectivity to avail exciting digital information, education and
entertainment services.
• Broadband services will also open tremendous opportunities for users
to participate in the growing knowledge economy, through interactive
services in education, health, entertainment, travel, banking and a host
of other sectors.
• More importantly, it will help improve productivity of all sectors of
the economy and help bring about a knowledge revolution in India.

20
 • India will soon have the largest digital infrastructure in the world and
will be among the largest mobile and broadband markets in the
world.The dream at Reliance is that India should be known as
Broadband Bharat.Reliance Infocomm will enable a Broadband
Bharat that is attuned to the information age.
• Reliance Industries has invested Rs 10,463 crore (US$ 2,393 million)
in equity and convertible preference shares of Reliance
Infocomm.With investments in the last mile, these assets will be
leveraged to generate superior returns from the Infocomm business in
the ensuing future.
• Reliance Infocomm may go public in 2005, Mukesh Ambani,
chairman of Reliance Industries said in New York on 07th October
2004.

Tele-Density for India (per 1000): 1997 - 2003

60
54
50
44
40
36
30 29
23
20 20

10

0
97-98 98-99 99-00 2000-01 2001-02 2002-03

Planning to invest Rs 25,000 crore in the Infocomm project, Reliance has already put in
more than Rs 15,000 crore for infrastructure like optical fiber network

As per the equity structure of Reliance Infocomm, Reliance Industries

(RIL) and the Ambanis hold 45 per cent each with employees/associates
holding 10 per cent equity.

21
Integrated strategy across an extended infocomm value chain:

STRATEGY TO PROMOTE INFOCOMM

VALUE CHAIN

Dhirubhai Ambani Entrepreneur Program:

The operation, to be carried out under the aegis of Dhirubhai Ambani

Entrepreneur Program (DAEP), would offer DSAs the attractive proposition
of participating in future businesses of Reliance like insurance, petroleum
retailing, and LPG retailing. Initially it was decided to appoint around
2,00,000 DSA across the country, who in turn were required to rope in just
50 subscribers each to achieve the 10-million magical mark. For becoming a
DAE, one has to provide a security deposit of Rs10,000 and buy a WLL (M)
connection and undergo a training of one day and pass a test.

22
 ¾ Reliance Infocomm worked backwards by looking at what the
customer could afford and came to the conclusion that he can
support average revenue per user (ARPU) of Rs 450 to Rs 500 a
month. Then it worked out what kind of investment would be
required to sustain these revenues and make money. It also
leveraged economies of scale to reduce costs.
¾ Reliance realised that the main capital investment in building a
fibre optic backbone is the cost of digging. Reliance has put in
eight ducts across the country. Its network is future proof for the
next 50 years. When new capacity is needed it has to only blow the
fibre at a very small incremental cost which will be difficult to
match.

¾ By using its own software specialists, Reliance was able to put up

the Java platform on its mobile phones at virtually 10 per cent of
what it costs companies in the US to do so.
¾ By setting up a centralised security system based in Mumbai for
the entire network Reliance Infocomm was able to reduce
manpower needs from 10,000 to just 200 software engineers.

TECHNOLOGY

23
 Reliance Infocomm uses Qualcomm Inc.’s Code Division Multiple
Access (CDMA) 2000 1 X technology. This technology handles better voice
quality & higher data rates as compared to GSM.

Reliance Infocomm has tied up with Kyocera for supply of high end
PDAs. Reliance has procured around 50,000 PDAs. The PDAs will be
focused for high end users whereby one can use it both as a phone as well as
a PDA.

The phone will be used for making voice calls whereas PDA will be
utilized to provide wireless data access for web clippings, HTML, SMS and
e-mail. Using speakerphone facilities one can use PDA while one is making
voice call.

ENTRY STRATEGIES

¾ By deciding to use PDAs for high end market they have not only
done value addition to their services but also they have decided to
cater for the segment where margins are high.
¾ Infocomm's strategy from the beginning was simple. It started
operations late, after the market had stabilised to a degree. But
eventually when it did, it did it with a splash. Its aim was to acquire
critical mass quickly by undercutting competition

This was because it saw that the telecom industry was heading towards
an oligopoly.

24
Although this meant huge losses in the short term, Reliance understood that
only a few telecom operators would remain in the next few years.

MARKETING STRATEGY
Reliance preferred DSA over channel partners. The DSA model offers
several advantages. Firstly, the DSA and his staff can do personalized, direct
marketing—in a manner not achievable by channel partners—at no expense
to Reliance.
Secondly, DSAs are utilizing all tools like fax, e-mail, telephone,
cable TV network, and one-to-one meetings to tell prospective customers
about ‘Reliance IndiaMobile’.
Thirdly, this is also building more hype for the service and allowing
Reliance to spend a lot less on advertisement, but more importantly,
enabling it to reach out to the optimally potential audience.

Fourthly ,from customer acquisition to verification and validation of

the supporting documents, to collection of cheques and depositing them at
the Reliance collection center, DAEs will handle all the back-end operations.
Reliance is thus saved of huge amount of time, effort and money.

For becoming a DAEP, one has to provide a security deposit of Rs

10,000 and buy a WLL (M) connection. He has to also undergo a training of
one day and pass the test that follows. . The DAE will get Rs 10,000 back if
he is able to get 10 connections. For the next 14 transactions, he gets no
incentives, but for 25–49 connections, the incentives are at the rate of Rs 100
per transaction; for 50–74 connections, the rate is Rs 200; and for 75–99
connections the rate is Rs 300. Thereafter, incentives are at the rate of Rs

25
400 per transaction. In order to recover his investment, the DAE has to bag a
minimum of 50 connections.

The very appointment of a DAE ensures one connection for Reliance,

as that’s one of the conditions for becoming a DAE. Thus, even before the
start of the service, the company has a base of around 200,000 subscribers,
whereas BSNL was able to get the same number four weeks after the launch
of its CellOne cellular services.

The model neatly combines the best features of the traditional channel
model and the ‘Amway’ model. Reliance gets a ready subscriber base of
200,000 DAEs by default. Moreover, a whole bunch of backend operations
is ‘outsourced’ to the DAEs for no fee.

STRATEGY OF SINGLE PLAN

Initially, the company has opted for a single plan—Dhirubhai Ambani

Pioneer Offer—so as to maximize the impact among subscribers and make
achieving the magical number easier. The uniformity of one plan also helps
customers grasp it easily and make them do a clear-cut comparison with
other GSM and CDMA services. This speeds up the decision-making
process of the customer, and in case a wrong decision is made, a 100-percent
buyback allows subscribers to return their phones without any deduction
within three months.

The single plan allows better logistics management, which can result in
significant savings for Reliance.

26
STRATEGY OF Delayed-Launch

Reliance has launched the network on 27 December, 2002, and was

planning to launch services on 14 January, 2002. By end of March 2003,
plans are to cover 637 towns and cities. Since the services rollout had got
delayed, Reliance was trying to entice customers by saying that subscribers
can access the network for free till March, while services would be
commercial only from April 2002.

This tactic appeared to be aimed at capturing those potential

subscribers who would have opted for Tata Teleservices’ CDMA services or
other GSM services because of Reliance’s delayed launch. They didn’t mind
using the service free of cost for a couple of months. As that happened,
Reliance was be able to start commercial services with a large number of
subscribers from day one. Meanwhile, it also got time to test the quality of
the network and iron out interconnect and other such issues before doing the
commercial launch of the service.

PREPAID STRATEGY

Reliance has always emphasized on prepaid. Prepaid services account

for 95% of cellular revenues. Even on the WLL (M) front, the company has
opted for a prepaid model.

This is basically a low risk strategy.

Prepaid helped Reliance in two ways. One, the revenue loss, for which
the cellular industry average is estimated at 10–15 percent, can be reduced to
a minimum of 5 percent. The revenue loss is mainly due to three reasons—

27
bad debt on account of collection problems, fraud, and revenue leakage.
Prepaid automatically addresses all the three problems. Two it can help in
funding for network expansion.

In India, even though prepaid is not known to yield high average

revenue per user (ARPU), it certainly is a proven tool for bolstering bottom
lines.

PORTER’S FIVE COMPITITIVE FORCES

ƒ Threat of New Entrants:

Many new entrants like Tata Indicom, Hutch, Airtel etc. are becoming
major concern for thought. These companies are providing threats to
Reliance Infocomm. Therefore the Reliance Infocomm has changed its
strategy accordingly in the past also. Up to now, Reliance has the
benefit of less call rate and strong brand image. But with the entrance of
Tata in this field increases the problems of Reliance Infocomm.
Reliance Infocomm is following the strategy of market penetration by
providing low cost service but Tata Indicom also adopt this strategy and
provide services at cheaper rate than Reliance Infocomm. Besides this,
Reliance Infocomm has a strong customer base which has strong faith
in Reliance Group. Thus Reliance is able to compete with its
competitors easily.

ƒ Bargaining Power of Suppliers:

Reliance Infocomm purchases handsets from LG, Samsung and Nokia.

They purchase handset in such a bulk quantity that every supplier want

28
 to sell their product. Thus the bargaining power of suppliers is very
less.

ƒ Bargaining Power of Customers:

Reliance Infocomm is already providing services at a cheaper rate.

Therefore the bargaining power of its customer is very less. But now
Tata Indicom launches its mobile service at very cheaper rate. Thus
customers have more options now. It would increase the bargaining
power of customers.

ƒ Threats of Substitute Products and Services:

Reliance Infocomm is providing mobile services as well as landline

connections to its customers. Many substitute mobile services are
providing threats to Reliance Infocomm. It includes BSNL, Hutch,
Airtel etc. These services are more costly than the Reliance Infocomm
mobile service.

ƒ Intensity of Rivalry among competing firms:

Reliance Infocomm has intense rivalry with BSNL, Airtel, Hutch, Tata
Indicom. These all are trying to attract the customers by providing more
and more benefits.

Ranking In Telecomm Sector

According to latest survey conducted by “Business world” published on 8th

Nov 2004 in telecommunication sector Reliance Infocomm have been

29
ranked 3 in 2004 while it was 11th in 2003 the list was topped by Bharti
Tele-ventures & 2nd was Tata Teleservices. The criteria were as follows.
Dues all quality of top management, depth &quality of talent, ability to
attract & retain talent, belief in transparency, ethics, social responsibility,
quality of product & services, response to customer needs, corporate/
product brand management, dynamism, speed of response to change, belief
in innovation, global in competitiveness, consistent performance, returns to
share holders, value creation for stake holders, ability to cope with recession

SWOT ANALYSIS;

Strength: There is much strength that Reliance Infocomm can count on and
boast off.

¾ The state-of-art technology Reliance Infocomm is offering-CDMA

technology.
¾ The strong subscriber base over 10million subscriber’s in their kitty.
¾ Mobile with in the reach of common man. Affordable schemes.
¾ Comprehensive Network-The strong back bone high capacity
network(terabit capacity) supported by fiber optic cables laid all over
the country(60,000km)
¾ Offering Value Added services to it’s customer’s almost free of cost
or with nominal charges.

¾ Reliance Infocomm was the first service provider to introduce finance

option on handsets.

¾ Value Added Services: First Call Center of 2,000 seats in Mumbai

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 ¾ Aggressive roll out to capture dominant market share and create an
entry barrier
CDMA 1x Technology

Weakness:

¾ Marketing strategy.
¾ Restricted mobility through its WLL services.
¾ Hidden Cost- Not able to retain the roped in customers.
¾ It only catered to the needs of post paid customers.
¾ Fewer varieties of handsets available offering CDMA technology.
¾ Lacks Transparency at end user level
¾ Lacks to spread Technological Awareness

Opportunity:

¾ Reliance Infocomm has timely and effectively used the technology

where the Indian Telecom Market was lacking behind-Broad Band
technology (CDMA) at affordable prices, thus capturing the market
significantly.
¾ Using the CDMA technology, it has revolutionized the data transfer
rates and low cost tariffs.

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 ¾ In the area of E-Commerce, Video on Demand, VoIP(Voice over IP),
Speech Recognition, Interactive Television, Intelligent Homes,
Virtual Reality.
¾ Providing instant connection to the customers making a happy and
satisfied customer base.
¾ Reliance Signs Amalgamation Agreement To Acquire Flag Telecom
Group Limited-- Plans to acquire submarine network cables from
FLAG Telecom($220 million dollars) which will drastically reduce
the ISD rates.
¾ Reliance Infocomm and Microsoft TV to work together on Next-
Generation
- India's Largest Private Sector Enterprise to Prototype and
Trial Next- Generation TV Services On a New End-to-End IPTV
Solution from Microsoft TV.

Threats:

¾ The threat from BSNL for the calls being blocked or barred at LDCA
level.
¾ Easy convertibility of the mobile handsets and reselling of lithium ion
batteries.
¾ Thefts and forgery regarding Handsets provided by company
¾ To face many legislative barriers form government as well as its

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 competitors
¾ Risk involved in financing the handsets.(Defaulters/Bad debts)
¾ Threat from operators such as BSNL, Aircel, Tata Tele Services each
with the expanding networks to sustain the competitive market
situation.

TIEUPS AND ACQUISITIONS

CABLE AND WIRELESS

Cable & Wireless has extended its global data network into India through a
cooperative relationship with Reliance Infocomm that will enable it to
extend its portfolio of global network services into India immediately to
satisfy growing demand from multinational customers for managed
international data network services in India.

Local loop access to the network will be provided by Reliance Infocomm

and covered by an SLA (service level agreement). Enterprises located
outside of Mumbai, Bangalore, and Chennai will be able to use Reliance
Infocomm's extensive nationwide network to connect to the Cable &
Wireless global network.

FLAG Telecom
FLAG Telecom Holdings is a global carrier's carrier. An acronym for Fiber
Loop Around the Globe, FLAG operates fiber optic undersea cable system
that spans from the UK to Japan (FLAG Europe-Asia) and a terabit
transatlantic cable system (FLAG Atlantic-1). It also provides connectivity
between Hong Kong, Seoul, Tokyo, and Taipei (FLAG North Asian Loop).
The company's provides capacity leasing, colocation, IP transit, managed

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bandwidth, and VPN services among others. FLAG serves about 180
network service providers. The company is owned by Reliance Infocomm
which is a subsidiary of Reliance Industries.

CRITICISM ON STRATEGY ADOPTED BY RELIANCE

Reliance has come in for criticism for its recent back-door entry into the
booming wireless market. While global system mobile communications
companies with international investors like AT&T and Singapore
Telecommunications bid for cellular licenses that have averaged hundreds of
millions of dollars each in public auctions, Reliance received limited-
mobility rights along with fixed-line licenses sold by the government at a
fraction of the cost.
By interconnecting different circles of limited-mobility services, Reliance
has assembled a nationwide network comparable to that of the G.S.M.
operators' systems.

Cellular operators accused Reliance of breaching regulations on limited-

mobility phones. But Reliance turned the commercial dispute into a
technological one, settled out of court, and became the prime beneficiary of
a changed regulatory regime.

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Biblography

• www.businessworldindia.com

• www.ril.com

• www.relianceinfo.com

• www.businessstandard.com

• www.economictimes.com

• Business Today (November 8’ 04)

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