MAY 25, 2003
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Q&A With Jack Dangermond
Meet the President of the California-based Environmental Systems Research Institute, a $480-million Geographic Information System (GIS) company. The man was in Delhi recently to sign an MoU with the Department of Science and Technology (DST) for the 'Mapping Your Neighbourhood' project. So what's this all about?


Village Women
Could Hindustan Lever be on to something big? Its Shakti project is a micro-credit programme that intends to get rural women organised into self-help groups, and that too, in such a way that raises their purchase budgets manifold. This just might be the way to crack the rural scene. A look at the potential.

More Net Specials
Business Today,  May 11, 2003
 
 
All Fall Down
The reinvention of Reliance Infocomm is on, and a new and improved company will be a whole lot more difficult for the competition to wish away. If...

It is early afternoon of a hotter-than-normal late-April day in Delhi and this correspondent has been led into a Reliance Infocomm warehouse by Mr X. There, sweating in the 40 degree Celsius-plus heat, are hundreds of thousands of CDMA phones that should have been, had the company had its way, been sold a long time ago. The initial plan, Mr X tells me, was to retail over 5 million handsets over a two-month period. In reality, he adds, the company hasn't activated more than five lakh subscriptions.

A few days later, on the last day of April, this correspondent receives a release from Reliance Infocomm announcing its "commercial launch" in "92 cities". "The Reliance IndiaMobile service has created a new benchmark in customer acquisition in the communications industry by signing up over one million customers in just 10 weeks of opening its offer only (sic) from 111 cities," it proudly proclaims.

So, what is the true story of a service that has thus far seen three launches-a commemorative one on the eve of the birth anniversary of the late Dhirubhai Ambani on December 27, an official one when the company started accepting applications on February 6, and now, a commercial launch on May 1-and countless SMS jokes (haven't you received one yet, Constant Reader?). No one knows. All that is known is that Reliance IndiaMobile went wrong with its pricing-, distribution-, and marketing-strategy, all of which are now being redrawn. And oh yes, the executive team in charge of India's most audacious telecom gambit has been rehauled. Beyond a few public announcements concerning these, and a rather self-laudatory press release, the company isn't saying much. "Our target is to acquire 15 per cent to 20 per cent of the growing mobile telephony market," says a spokesperson, "and we are well on course to achieving our targets."

RELIANCE INFOCOMM: WHAT'S HOT, WHAT'S NOT

What's Hot

» There's an increase in the 2-phone, CDMA+ GSM trend
» Reliance is entering the prepaid market, which accounts for 70 per cent of the whole
» There's an increased data-on-mobile consumption
» The company could soon move to a full mobility licence through a convergence legislation
What's Not
» Its service is still limited: 92 cities against a target of 673
» There is regulatory uncertainty on roaming, messaging, and tariffs
» The company still has to address the retail challenge
» Problems with its launch strategy (like bouncing post-dated cheques) are just coming home to roost

What Went Wrong?

It should have been easy for a behemoth like Reliance to take the telecom space by storm (as an article in this magazine suggested it would in January; See In The Line Of Fire, BT, January 5, 2003). India's cellular market alone grows by almost a million subscribers a month. Then, there's the opportunity presented by customer churn-an average of 15 per cent for most players. If Reliance couldn't do it, blame, or some part of it, must go to its choice of channels. It was good of the company to launch a Dhirubhai Ambani Entrepreneurs programme that would make people rich (at the least, moderately well off) selling Reliance IndiaMobile connections. But it didn't work. Nor did potential customers like the fact that they would have to pay, wait two weeks, and then receive an activated phone.

The company has addressed this by simply doing away with its DAE programme. In came Reliance-owned stores branded Webworld. Already 100 of these stores are up and running and another 150 will open doors by the end of May. The retail experience on offer at Webworlds is better than having to deal with small-time real-estate agents turned DAEs and any glitches (there are some; See A Question Of Reliability) can be put down more to teething troubles than a strategic mistake. Like many I-told-you-so analysts swore, the company's lack of retail experience did tell, but the Webworlds-Reliance Infocomm plans a network of at least 686-should help.

What should worry Reliance execs more is the fact that interconnect problems-they have since been sorted out-and the buzz about the service's quality (one irate customer claimed he had to dial five times to call numbers on other networks). Courtesy this bad word of mouth, customers, especially corporates that had promised to buy IndiaMobile connections by the hundreds remained content to buy a few, or none at all. And tariffs, the differentiator that the company thought would encourage defections galore from other networks have failed to work their magic: India's cellular industry has proved adept at slashing tariffs.

RIL's Mukesh Ambani: Second-time lucky?

Worse, there are regulatory question marks over IndiaMobile's tariffs, and its ability to offer roaming and messaging services. "IndiaMobile customers can send and receive SMS messages to and from GSM phones," says Reliance's spokesperson. "This facility is under test and is likely to be operational any day now." Even after the commercial launch, the company is in the regulator's dock, answering questions on how it can offer calls at Rs 0.40 per minute to anywhere in the country.

The Back-end To The Rescue

Still, it won't do to write off Reliance Infocomm. The company has re-engineered its distribution and marketing efforts. It has also bid goodbye to its Head of Marketing Amit Bose. Reports say that the business will now be spearheaded by a 10-member A-team that will include Manoj Modi, Hitel Meswani, Nikhil Meswani, B.D. Khurana, Akhil Gupta, and Prakash Bajpai.

The company has rationalised its pricing strategy, reducing the entry cost. In addition to the option of making a down payment of Rs 21,000 for a three-year period or an upfront payment of Rs 3,000 along with post-dated cheques worth Rs 21,600, you can now make a down payment of Rs 6,350 and be billed Rs 500 every month (for 400 minutes), or just pay Rs 3,350 and be billed Rs 600 (for 400 minutes).

A Question Of Reliability
A quick check of two Webworld stores shows that the Reliance retail experience is still not perfect.
Can I SMS to a GSM phone?
From May 1, you can.
You cannot. The regulator has disallowed it but it will be sorted out soon

What is the data speed on this phone?
144 kilo bits per second
20 kilo bits per second today but this will increase to 144 kbps latest by October.

Can I order the just launched colour Samsung and LG colour handsets?
You can get it in 15 days.
It may be available in 7 days.

Hasn't the regulator disallowed roaming outside Delhi to surrounding cities like Gurgaon, Faridabad and Noida?
We are offering it.
We will soon extend the call-handover to other cities too.

And as even its die-hard detractors will be forced to admit, Reliance Infocomm has an impressive back-end ready to pipe data at furious speeds. "CDMA is much more efficient in terms of data handling than GSM,'' points out V. Shekhar Awasthy, a Delhi-based telecom analyst with IDC India. Reliance is getting ready to leverage this functionality by launching, according to its spokesperson, "city guides, online gaming, and transaction-based services."

A high-speed data service will help the company crack the enterprise market as well. Scheduled to be served up by October of this year, the Reliance Enterprise Express Netway aims to provide high speeds through its terabit capacity optic fibre network, some 60,000 kilometres of which has been laid and lit.

The enterprise segment accounts for 60 per cent of the revenue of India's telcos, exhibit churn rates half that in the retail segment, and boast customer acquisition costs that are 25 per cent lower. As management consultancy McKinsey puts it in one report, "this segment (in India) is currently underserved...therefore, it presents significant potential."

To tap this potential, Reliance will have to compete with an emerging clutch of heavyweights: a born-again (and aggressive) BSNL that has walked away with the honours for the telecom launch of 2002, the Tata Group, which has created an entity called Tata Enterprise Business Unit to target corporates, and Bharti. And the company will also have to go up against the likes of Sify, India's leading corporate internet access provider.

In December 2002, when Reliance Infocomm unveiled its service with a cloudburst of publicity, the company may have thought that it would take the Indian market by storm. That hasn't happened. But the education of Reliance Infocomm could prove costly for the competition. There is a sense of that happening in the market already. For one, the jokes about IndiaMobile have dried up.

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