RELIANCE: New Boss, Renewed focus?

The

communication industry is sure to keep a close watch on Reliance Infocomm this

financial year. For reasons, both good and bad, the telecom arm of India's

biggest corporate group was in news throughout the year. Much to the relief of

the shareholders, the dispute resolution between the Ambani brothers on



June 18, 2005 halted the rumor mills that were churning out speculative stories
about the future of the Reliance empire.

Now under the leadership of Anil Ambani, the younger of the two brothers, and

as part of a new group, Anil Dhirubahi Ambani Enterprises, the Rs 5,387 crore

Reliance Infocomm would gear up to take on the fierce competition in the telecom

sector. To make the company more competitive, the media savvy and marketing

suave Anil may opt for a management level makeover as few executives have moved

to Reliance Industries Limited (RIL). There are also talks of a push to the IPO

process.

Reliance Infocomm posted a profit of Rs 51 crore in financial year 2004-05

mainly due to other income and exceptional items. However, in financial year

2003-04 the company posted a loss of Rs 390 crore.

Reliance is present in 22 circles, if its GSM and CDMA operations are taken

together. With a mobile subscriber base of 10.45 million, the company grabbed a

market share of 20 percent in less than two years of operations. The firm

registered a 44 percent growth on the CDMA front, and 41 percent on GSM between

March 31, 2004 and March 31 2005. In 2004-05, Reliance had 93,30,088 CDMA and

11,15,235 GSM subscribers.

The growth was more spectacular on the fixed wireless and wireline side.

Year-on-year, it recorded a jump of 160 percent in the number of subscribers. On

March 31 2005, there were 1,310,799 subscribers in this segment, as compared to

503,352 on March 31 2004.

Reliance Infocomm has been successful in bringing down its bad debt from Rs

436 crore in 2003-04 to around Rs 17 crore in 2004-05. This was mainly due to

the deployment of a better system to check delinquency and sustained efforts to

improve cash collection. Almost 80 percent additions in the pre-paid segment

incrementally and migration of post-paid customers to pre-paid has also helped

in checking bad debts.

However, the controversy surrounding the rerouting of international calls hit

the company hard. In March 2005, Reliance Infocomm had to pay a fine of Rs 150

crore to the Department of Telecom as TDSAT upheld the DoT's contention that

the private telecom player had violated license conditions. A company statement,

however, denied that any violations took place and said it would establish that

it was following license conditions.

In the days ahead, the fiercely competitive industry would evaluate every

move Anil Ambani makes with regard to his company. Most certainly, the new boss

of Reliance Infocomm would want to leave behind the disturbing events of the

last few months and concentrate on providing better services for both the retail

and enterprise segments. With GSM operators already on the drawing boards for 3G

services, Reliance Infocomm will have to move fast and gets its act together.

"Simple tariffs and recharge plans have made customers stick to us"

How was the last financial year for Reliance and what was the mantra to

attract over 10 million customers in a short span?



Last year was very important for us. We became the front-runners in the

mobile industry with Infocomm becoming the number one company. There were

various factors that attracted over 10 million customers to our company. We

innovated in various areas and those ideas clicked with the users. Not only

customers other companies also followed our ideas. Things like simplified tariff

structure, unlimited calling schemes and half vouchers were instant hits with

the customers. And,



we take pride in these types of innovations.

What is the post-paid and pre-paid split?



We have taken off both in post-paid and pre-paid segments. The combined

success of both has made us number one in mobility business. Our pre-paid

additions were highest in the industry. The split in number of acquisition has

been 70:30 in favor of pre-paid customers.

How has been the churn rate for Reliance?



The various tariff structure and recharge options have been very successful

and customers have been with us. As an industry telecom is very volatile. In GSM

there has been a lot of churn but in CDMA the churn rate has been very low. For

us the number of handsets sold is an indication of how many customers we are

acquiring. We have the widest range of handsets starting from Rs 2000 to Rs

10,000. The variety has kept the customer interest high and so the churn rate

has been low.

What is current strength of the company? What is the network coverage?



The total employee strength is around 42,000. And now we have a new

management team to lead the company. We have built a network with minimum or no

drop rate, it is congestion free and, of course, the capacity is huge. We had

accounted for the rise in demand and factored that while planning the network.

At present we cover 3,500 cities and by December 2005 we would be covering

another 5,700. We are building our network in J&K where we have got the

license. In 2005 we connected Andaman and Nicobar too. The island is connected

via satellite to the main land and within the island there is an OFC network.

How has been the performance of the data part of your business?



There has been lot of planning to build upon the data segment for the

company. And ever since its launch it has done extremely well. There has been

lot of focus on data customers and we have sizeable numbers. Again for us

handsets have been very important in this success. Almost 80 percent of handsets

are data enabled. There are close to 240 Web World where the customers can

experience our data offerings. They can surf the net, send MMS video clips and

even see TV clips on their handsets. But most customers need information on the

services and have to be cared for. The Webworld Express is part of this endeavor

and we have almost 1,200-1,300 of these retail outlets for us now.