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RELIANCE COMMUNICATION’S STRATEGY AND ITS
IMPACT ON THE INDIAN MOBILE
TELECOMMUNICATIONS INDUSTRY
Student Name: Ankit Yadav – 297986
Course: BA (Hons) Business Administration Top –Up
Northbrook College Sussex – West Durrington Campus
Year of Submission: 2009 - 2010
Dissertation Supervisor: David Broughton
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Acknowledgements
The witting of this dissertation has been one of the most significant academic
challenges I have ever had to face. Without the support, patience and guidance of the
following people, this study would not have been completed. It is to them that I owe my
deepest gratitude.
• Lecturer David Broughton who undertook to act as my supervisor despite his
many other academic and professional commitments. His wisdom, knowledge
and commitment to the highest standards inspired and motivated me.
• My parents, who have always supported, encouraged and believed in me, in all
of my endeavours.
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Declaration
I, the undersigned, hereby declare that this dissertation entitled, “Reliance
communications strategy and its impact on the Indian mobile telecommunications
industry” is my own work, and that all the sources I have used or quoted have been
indicated or acknowledged by means of completed references.
Ankit Yadav Date of Submission
Word Count: 12,024 (Twelve Thousand and Twenty Four).
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Abstract
Recognising the crucial role that can be played by the telecommunications sector in
India’s development, the Government of India in 1999 initiated a number of changes in
the telecommunication and regulatory and policy framework. Through these the
Government of India hoped to facilitate an increase in telecommunication penetration,
which stood at 1.3 percent in 1995. The reforms, with an eye on a telecommunication
penetration of fifteen percent by 2010, resulted in a flurry of private operators entering
the market breaking the monopoly of the incumbent operator Bharat Sanchar Nigam
Limited (BSNL). Reliance Communications was born in the year 2000 as a child of the
market liberalisation process with a vision to provide the latest telecommunication
facilities to every Indian at the price of a post card. Reliance Communications helped
the mobile phone penetration in India to grow from 0.25 percent in early 2001 to 40.31
percent in January 20101.
The first part of this dissertation will introduce the scale and complexity involved in
shaping the Reliance Communications vision in reality. The second part will examine
the cost strategies adopted by the Reliance Communication, while the third part
examines the creative ways in which the process of marketing value added to the
process.
1 TRAI (2010). The Indian Telecom Services Performance Indicators.
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Table of Contents
ACKNOWLEDGEMENTS .......................................................................................................................................... 2
DECLARATION ........................................................................................................................................................ 3
ABSTRACT .............................................................................................................................................................. 4
LIST OF ABBREVIATIONS ........................................................................................................................................ 7
HYPOTHESES .......................................................................................................................................................... 9
AIMS AND OBJECTIVES .......................................................................................................................................... 9
1.0 INTRODUCTION .............................................................................................................................................. 10
2.0 LITERATURE REVIEW ...................................................................................................................................... 12
2.1 THE VISION, SCALE AND COMPLEXITY ............................................................................................................. 12
2.2 PRICING STRATEGY .......................................................................................................................................... 15
2.2.1 Dhirubhai Ambani Pioneer Offer – Democratising Mobiles.............................................................. 17
2.2.2 Monsoon Hungama Scheme – Showers of Mobiles ......................................................................... 19
2.2.3 Pre-paid Offering – Market Consolidation .......................................................................................... 20
2.2.4 Cost Management – The Inside Picture ............................................................................................. 22
2.3 SALES AND MARKETING STRATEGY ................................................................................................................. 27
2.3.1 Customer Generation – Tapping in to Internal Resources ............................................................... 27
2.3.2 Dhirubhai Ambani Entrepreneurship Programme – A New Way to Market ................................... 28
2.3.3 Advertising – Educating Masses and Evoking Passions .................................................................. 30
2.3.4 RWorld – Reliance Way of Putting the World in Your Hands .......................................................... 32
2.3.5 Product Innovations – Connecting with Every Section of Society .................................................. 33
2.3.6 Customer Service – Icing on the Marketing Cake ............................................................................. 35
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2.4 TACKLING THE PROBLEM PHASE ..................................................................................................................... 35
3.0 METHODOLOGY ............................................................................................................................................. 40
3.1 RESEARCH METHODS....................................................................................................................................... 40
3.2 DATA COLLECTION TECHNIQUES ..................................................................................................................... 41
3.3 LIMITATIONS TO THE RESEARCH ....................................................................................................................... 42
4.0 RESULTS AND FINDINGS ................................................................................................................................. 44
5.0 CONCLUSIONS ................................................................................................................................................ 50
6.0 RECOMMENDATIONS ..................................................................................................................................... 52
REFERENCES ......................................................................................................................................................... 54
APPENDICES......................................................................................................................................................... 58
APPENDIX – 1 – QUESTIONNAIRE RESULTS: .......................................................................................................... 58
APPENDIX – 2 –FIFTH LARGEST TELECOM OPERATOR IN THE WORLD: .................................................................. 65
APPENDIX – 3 –TARGETS THE LARGEST UNTAPPED POPULATION IN THE WORLD: ................................................ 65
APPENDIX – 4 – QUESTIONNAIRES ......................................................................................................................... 66
Appendix – 4.1 Reliance Mobile User Category Questionnaire: ............................................................... 66
Appendix – 4.2 – Non-Reliance Mobile User Category Questionnaire: ................................................... 68
APPENDIX – 5: SUBSCRIBER NUMBERS (MILLIONS) BY SERVICE PROVIDER .......................................................... 70
APPENDIX – 6: STRATEGY COMPETITIVE ADVANTAGE .......................................................................................... 71
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List of Abbreviations
BSNL – Bharat Sanchar Nigam Limited
BTS – Base Transceiver Station
CDMA – Code Division Multiple Access
COAI – Cellular Operators Association of India
CPP – Calling Party Pays
DOT – Department of Telecommunications India
GIS – Global Information Systems
GSM – Global Subscriber Mobile
IDC – Internet Data Centre
IPLC – International Private Leased Circuit
ISV – Independent Software Vendors
NCDEX – National Commodity Derivatives and Exchange Limited
POS – Point of Sale
RIM – Reliance India Mobile
SMS – Short Messaging Service
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TRAI – Telecommunication Regulatory Authority of India
VPN – Virtual Private Network
WLL – Wireless in Local Loop
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Hypotheses
The strategic route taken by Reliance communication is the right way forward for the
Indian telecommunications industry.
Aims and Objectives
The main aim of this dissertation is to look critically if the unlimited and in house
resources available to Reliance Communication are the factors for the huge success or
Reliance Communications; and also if in any way Reliance Communications have used
its power as a business conglomerate against its competitors unlawfully.
Core objectives of this dissertation are to:
� investigate Reliance Communications role in the transformation of the Indian
telecommunications industry;
� investigate what were the challenges and complexities which Reliance
Communication faced during the transformation process;
� investigate how Reliance Communication tackled the problem phase;
� investigate who are Reliance Communications main competitors and what
strategies and processes are used by its competitors to gain the market share;
and
� investigate how Reliance Communications could have used different strategies.
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1.0 Introduction
In 1999 the Government of India recognised how the telecommunication sector could
play a crucial role in India’s development and then initiated number of changes in the
mobile telecommunication regulatory and policy framework. By initiating these changes
the Indian Government hoped to facilitate an increase in telecommunication penetration;
this resulted in a flurry of private operators entering the market breaking the monopoly
of the incumbent state owned operator Bharat Sanchar Nigam Limited (BSNL).
The foundation of Reliance communications (RCOM)2 was laid in 1999, with a vision to
“provide the latest telecommunications facilities to every Indian at a price of a post
card”. With over 86 million subscribers across India, Reliance communications is India’s
second largest mobile service brand. Reliance Communications now cover over 2,400
towns, 600,000 villages, and still counting. Reliance Communication has achieved many
milestones in this short journey. In 2003, AC Nielsen voted Reliance Communications
as India’s most trusted brand. In July 2003, Reliance Communications created a world
record by adding one million subscribers in a matter of just ten days through its
‘Monsoon Hungama’ offer3.
What sets Reliance Communications apart from its competitors is the fact that nearly
ninety percent of their handsets are data-enabled, and can access hundreds of Java
2 Bombay Stock Exchange – Script – RCOM.
3 Reliance Communications. (2010). Overview – Businesses – Mobile.
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applications on Reliance Communications Mobile world. Reliance Communication has
ushered in a mobile revolution by offering advanced multimedia handsets to the
‘common man’ of India at very reasonable prices. This innovative low pricing has
increased the number of mobile phone users and its result is clearly reflected in the
meteoric rise in India’s tele-density over the past eight years. Reliance Communications
pan-India wireless network runs on CDMA2000 1 x technology, which has superior
voice and data capabilities compared to other cellular mobile technologies. CDMA2000
1 x is more cost effective as it utilises the scare radio spectrum more efficiently than
other technologies do. Enhanced voice clarity, superior data speed of up to 144 kbps
and seamless migration of newer generations of mobile technologies are some of
Reliance Communications differentiators4.
The main purpose of this dissertation is to study and discuss the main strategies
adopted by Reliance Communication to usher in the telecommunication revolution in
India. Specifically this dissertation will examine the new paradigms in cost competence
and marketing which helped Reliance Communication to drive down costs and drive up
volumes.
4 Reliance Communications. (2010). Overview – Businesses – Mobile.
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2.0 Literature Review
During the search for literature following search engines have been used: Google.co.in,
in.yahoo.com and Rediff.com have been used and in addition these Google Scholar,
Gale Power Search, market line and Emerald Insight were used as well. Initial searches
focused around ‘Reliance communication’s strategies’, ‘Reliance communication’s
profile’ and ‘Reliance communication’s competitors’.
2.1 The Vision, Scale and Complexity
To succeed in the long term, businesses need a vision of how they will change and
improve in the future. The vision of the business gives it energy. It helps in motivating
employees. It helps set the direction of corporate and marketing strategy5. Following are
the six requirements for success:
- provide future direction;
- expresses a consumer benefit;
- is realistic;
- is motivating;
- must be fully communicated;
- consistently followed and measured.
5 N/A (2010). “Strategic planning – values and vision.”
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Reliance Communications vision states:
“We will leverage our strengths to execute complex global-scale projects to facilitate
leading-edge information and communication services affordable to all individual
consumers and businesses in India.
We will offer unparalleled value to create customer delight and enhance business
productivity. We will also generate value for our capabilities beyond Indian borders and
enable millions of India's knowledge workers to deliver their services globally.”6
The founder of Reliance Group of Companies – late Dhirubhai Ambani dreamt of digital
India – an India where the common man would have access to affordable means of
information and communication. Dhirubhai, who single-handedly built India’s largest
private sector company virtually from scratch, had stated as early as 1999: “Make the
tools of information and communications available to people at an affordable cost. They
will overcome the handicaps of illiteracy and lack of mobility.”7
Reliance Communications was launched as a very ambitious project. The project was
conceived at the convergence of communication and information technology. It was
designed to connect every home and office in India with each other and the world
through an overarching terabit optic fibre digital distribution system. It was developed to
provide a range of services to every citizen, company and community. It was envisaged
6 N/A. (2010). “Overview - Vision.”
7 N/A. (2010). “About Sh. Dhirubhai Ambani”.
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to earn leadership for India in the knowledge age. Reliance Communications aimed to
create new paradigms in enterprise, entrepreneurship and engagement8.
To achieve all of these objectives Reliance Communications rolled out a complex
architecture of domains, functions, facilities, coverage and services, through the latest
technology aiming to add value through messaging, facilitating business transactions,
videoconferencing, music and movie download services. According to a comparison
cited by Mukesh Ambani, former Chairman of Reliance Communications, the United
States has only about 100 out of 700 cities with the CDMA2000 1 X technology that
provides the benefit of mobile voice, data and video, while Reliance Communications in
2008 stated providing these services to 100% of Indian cities.
According to Anil Ambani, current Chairman of Reliance Communications, company has
built the largest infrastructure in the information and technology sector by any new
entrant. To begin with, Reliance Communications has networked 673 towns and cities.
Currently it has presence in 1,850 towns and cities and 75,000 villages touching about
550 million Indians. At the end of 2008, the company successfully connected all
640,000 villages and 5,161 odd towns and cities to each other and to the world in a
seamless way. This gigantic effort involving more than 8,500 BTS (Base Transceiver
Stations) towers covering about ninety one percent of the country’s national highways
8 N/A. (2010). “About Sh. Dhirubhai Ambani”.
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and 85% of the rail routes is compared by the company officials to the scale of effort
involved in building virtually the entire railway system in India9.
2.2 Pricing Strategy
“My vision is to provide the latest telecommunication facilities to every Indian at the
price of a post card” – Late Dhirubhai Ambani, founder Reliance group. “A monthly
spend of Rs 25010 (GBP £ 3.67) would usher in a telecom revolution in India. At that
rate, the telecom market will be around 600 million lines,” said by B D Khurana, group
president, Reliance Communications11.
Reliance Communications challenged old cost structures in the telecommunications
industry. Historically, telecommunications services have been the privilege of a small
section of society. Reliance Communications broke this mould with a tariff that can be
described as the most ambitious ever listed by a telecom company in India12. It aimed
for prices as low as the cheapest alternative – the post card. While other companies
aimed for higher value market, Reliance Communications realised that there is a market
in driving volumes aimed at creating a completely new market. “According to estimates
there are around 320 million [people in] households with an annual income of Rs 2.5
9 N/A. (1999 – 2009). “Milestones”.
10 1 GBP £ = Rs.68.00 INR.
11 Jagannathan, V. (2003). “Affordability is what hinders telecom revolution, finds seminar”.
12 Ganpati, P. (2002). “Reliance set to revolutionise mobile services”.
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lakh (GBP £ 3,676) [and above]. Of that, half are in rural areas with similar purchasing
power. And this segment was expected grow to 478 million by 2007 and 602 million by
2010” commented by B D Khurana, group president, Reliance Communications, hinting
about the market that Reliance Communications aimed to capture13.
Following on from his work analysing the competitive forces in an industry, Michael
Porter suggested four “generic” business strategies that could be adopted in order to
gain competitive advantage14. The four strategies are summarised in (appendix six)
In case of Reliance Communications cost leadership strategy has been implemented as
in this strategy, the objective is to become the lowest-cost producer in the industry.
Many (perhaps all) market segments in the industry are supplied with the emphasis
placed minimising costs. If the achieved selling price can at least equal (or near) the
average for the market, then the lowest-cost producer will (in theory) enjoys the best
profits. As this strategy is usually associated with the large scale businesses offering
“standard” products with relatively little differentiation that are perfectly acceptable to the
majority of customers15.
This strategy has worked very well for the Reliance Communications to gain the market
share very quickly and gain a strong foothold in the Indian telecommunications market
13
Jagannathan, V. (2003). “Affordability is what hinders telecom revolution, finds seminar”.
14 N/A. (2010). “Strategy – Competitive Advantage.”
15 N/A. (2010). “Strategy – Competitive Advantage.”
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in a short span of time. Occasionally Reliance Communications also discounts its
products to maximise sales, as it has a significant cost advantage over the competition
and, in doing so, Reliance Communications can further increase its market share.
2.2.1 Dhirubhai Ambani Pioneer Offer – Democratising Mobiles
Announcing its launch of mobile services in December 2002 Reliance Communications
offered an introductory scheme called the ‘Dhirubhai Ambani Pioneer’ offer. Under this
scheme consumers were given a free digital mobile phone, unlimited free incoming
phone calls, billing at fifteen-seconds pulse rate, for a one-time fee of Rs 3,000 (GBP £
44) as a membership charge and Rs 600 (GBP £ 9) per month (paid in advance) as
telephony charges. All incoming calls were offered free and outgoing calls were charged
at 10 paisa (0.2 GBP £ pence) for fifteen seconds. The cost of a national long-distance
call to any Reliance phone in India was forty paisa (0.8 GBP £ pence) for a minute16. In
addition, the monthly charge included 400 minutes of outgoing calls. Only calls over and
above this were charged extra. Value added services like voice mail, call waiting, call
hold, call divert, call identification, call conferencing, dynamic locking and text
messaging were offered free. Internet access through the phones was also offered free
initially17.
16
N/A. (2002). “Reliance Infocomm heralds a new way of digital life for India”.
17 Ganpati, P. (2002). “Reliance set to revolutionise mobile services”.
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“The pricing system is in line with Dhirubhai Ambani’s dream and directive of making
phone calls affordable for every Indian. It has been made possible due to the significant
capital productivity achieved,” – said by Mukesh Ambani, former Chairman, Reliance
Communications18.
The Dhiubhai Ambani offer unlocked the demand for telecommunication services in
India by challenging many accepted practices. The biggest entry barrier till that point
was the handset prices. The mobile handsets in the Indian market were priced at Rs.
7,500 (GBP £ 110) upwards, which made them unaffordable for most Indians. Handsets
were to be purchased separately since the operators until then offered only services,
and never dealt with handsets. For a customer this meant to deal with two suppliers –
one for services and another for handset. Reliance Communications, for the first time in
India, offered handsets free of charge, along with the service19.
Reliance Communications managed this free handset offer in three ways. Firstly,
Dhirubhai Ambani offer had a built-in contract of three years for every customer. This
guaranteed cash flows and minimised churn allowing them to discount the cost of the
phone. Secondly, Reliance Communications entered into exclusive agreements with
handset vendors like LG and Samsung. For a guaranteed purchase of hugs volumes
(between one million and eight million phones) the prices were negotiated down to rock
18
N/A. (2002). “Reliance Infocomm heralds a new way of digital life for India”.
19 N/A. (2002). “Reliance Infocomm ushers a digital revolution in India”.
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bottom. Thirdly, brand, thus ensuring mass production and further reduction in prices.
Internal estimates say that the handset model which was available on the open market
at a price of Rs. 10,500 (GBP £ 155) was procured at a price of Rs. 800 (GBP £ 11.75)
by Reliance Communications.
2.2.2 Monsoon Hungama Scheme – Showers of Mobiles
In an attempt to further democratise telecommunications services, Reliance
Communications followed up the Dhirubhai Ambani Pioneer offer with the Monsoon
Hungama Scheme on the 1st of July 2003. This unprecedented scheme allowed
customers to get a mobile phone for an upfront payment of just Rs. 501 (GBP £ 7.50),
bringing down the entry barrier to a bare minimum. This scheme also permitted a low
monthly spend, allowing the customers to restrict the fixed monthly outgoing (post-paid)
to Rs. 449 (GBP £ 6.60), inclusive of the Rs. 200 (GBP £ 2.95) paid as club
membership and privilege charges20.
Reliance Communications Monsoon Hungama offer of a phone for Rs. 501 (GBP £ 7,
50) was a runaway success. Monsoon Hungama Scheme pushed Reliance
Communications to the top of the telecom market in terms of the subscribers. It was the
biggest promotional success in the history of mobile telephony in India. One million
subscribers joined Reliance Communications in just ten days after the launch of the
Monsoon Hungama Scheme. The ripples of the offer were not limited to Reliance
20
N/A. (2003). “Reliance Infocomm makes mobile telephony more affordable”.
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Communications. This offer led GSM handset prices to fall as low as Rs. 1,500 (GBP £
22). In the footsteps of Reliance Communications, during the same period, many
competitors started offering flexible pre-paid options at less than Rs. 500 (GBP £ 7.35)
per month for their GSM mobile services21.
2.2.3 Pre-paid Offering – Market Consolidation
As the market of post-paid mobile services started stabilising, Reliance
Communications launched its first pre-paid offer. The pre-paid offer marked a
fundamental shift in Reliance Communications strategy where it had built a post-paid
customer base of over six million through the pioneer and Hungama schemes. At a time
when Reliance Communications was finding it hard to manage its post-paid customers,
the new strategy offered two advantages. First, there was the obvious advantage that
cash is collected beforehand. Second, the cost of collecting bills – which is one to three
percent of revenue – vanished22.
In February 2004, Reliance Communications announced another set of pre-paid
schemes, quite different from the earlier schemes. The schemes gave customers free
recharge vouchers worth nearly the cost of a Reliance India Mobile (RIM) pre-paid
handset that they buy. In simple terms it meant that customers were getting the phone
free rather than having to buy it as they would if they opted for a GSM pre-paid scheme.
21
Gupta. D, S. (2004). “Reliance makes a cash call”.
22 Gupta. D, S. (2004). “Reliance makes a cash call”.
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Also, the customers were allowed to remain connected for a full year without having to
buy new recharge vouchers. Under the pre-paid launch scheme, a customer had to pay
Rs. 3,500 (GBP £ 51.50) for a Motorola C131 handset and received free Reliance
Communications pre-paid connection and recharge vouchers worth Rs. 3,240 (GBP £
47) valid for six months and with additional grace period of six months. In this scheme,
all local calls, intra-circle calls and inter-circle calls of less than 50 km to another mobile
phone had a flat rate of Rs. 2.49 (GBP £ 0.036) per minute. All inter-circle calls of above
50 km to another mobile phone had a flat rate of Rs. 2.99 (GBP £ 0.043) per minute. All
local calls, intra-circle calls and inter-circle calls of less than 200 km to a fixed phone
had a flat rate of Rs. 2.99 (GBP £ 0.043) per minute and all inter-circle calls of above
200 km had a flat rate of Rs. 3.99 (GBP £ 0.058) per minute. International calls were
billed at Rs. 16.99 (GBP £ 0.25) per minute23.
Other features of Reliance Communications pre-paid connection included automatic
roaming in the pan-India Reliance Communications network at no extra charge, a
nationwide recharge facility with any available denomination (stating from Rs. 165 or
GBP £ 2.45), a national long distance and international long distance facility, and call
forwarding and voice messaging services at local mobile call rates from anywhere in the
Reliance Communications network. This scheme was different from the earlier schemes
in two ways. Firstly, though the handset came virtually free of charge, the entry barrier
was definitely higher since the customer committed to a higher volume of calls.
23
Ashiwal, S. (2004). “Reliance Infocomm unveils plans for prepaid service”.
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Secondly, the customers who were hoping that Reliance Communications would bring
prices substantially down, as in the past, were disappointed. Airtime tariffs (the price of
calls per minute) of this scheme (discussed above) were almost the same as those
offered by the GSM operators24.
It is interesting to note the subscriber figures (in millions) provided by the Telecom
Regulatory Authority of India during the same time period please refer to appendix five.
2.2.4 Cost Management – The Inside Picture
The Reliance Communications pricing system was always in the line with Dhirubhai
Ambani’s dream and directive of making phone calls affordable for every Indian, and
has been possible due to the meticulous planning, ‘out of the box’ thinking in touch with
reality, and significant capital productivity achieved on the strength of Reliance
Communications track record in project management25.
Reliance Industries, the parent company of Reliance Communications, is the largest
private sector corporation in India with stakes in Petroleum, Petrochemicals,
Engineering, and Finance. This scale of operations provided great leverage as the
company ventured into telecommunications. Reliance Communications, in the initial
stages, shared all Reliance Industries resources to ensure cost effectiveness in every
service that it provided. Reliance Communications operated out of existing Reliance
24
N/A. (2004). “Reliance Infocomm storms prepaid market, announces path breaking schemes”.
25 N/A. (2002). “Reliance Infocomm heralds a new way of digital life for India”.
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Industries offices and utilised the capital and personnel resources to the extent possible.
Reliance Engineering Associates Ltd, as associate company, made sure that the
engineering and manpower costs were maintained at bare minimum. According to B D
Khurana, the Group President of Reliance Communications “... in developed countries
human resource costs account for twenty two percent of a telecommunication
company’s operating costs as against five percent in India...But we utilise all of our
internal resources in large numbers which further reduces the cost”. In addition Reliance
Communications centralised most of its operations. Citing Reliance Communications
strategy, B D Khurana said: “80 percent of our administration and operation is
centralised. Compared to the best telecom networks in the world we have deployed only
half the number of people per 1,000 lines making our human resources the highest
productive resource.” Reliance Communications also exploited the extensive distribution
channels which were set up by its parent company, Reliance Industries for promoting
and distributing its mobile services.
A group company, Reliance Telecom Ltd, which uses the GSM technology to provide
services to seven telecom circles across eleven North Eastern states of India, helped
Reliance Communications in learning and managing cost structures during the initial
stages. Reliance Telecom and Reliance Communications synergy helped in the
optimum utilisation of their networks in two ways. Firstly, Reliance Communications
network started routing all the calls originating from Reliance Telecom, which
guaranteed traffic and revenues from day one and, secondly, the network of Reliance
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Telecom helped Reliance Communications in gaining a foothold in the North Eastern
market, where it did not possess telecommunications licences.
Provision of multiple services is another strategy which Reliance Communications used
to manage costs. When most of the other mobile operators focused exclusively on the
provision of mobile services, Reliance Communications, in a phased manner, started
offering all the services which could utilise their network and other resources optimally.
Apart from the basic mobile services, Reliance Communications currently offers
landline, broadband Internet, leased line, VPN (Virtual Private Network), IPLC
(International Private Leased Circuit), Centrex and IDC (Internet Data Centre) services,
thus achieving lower costs per service and more revenues.
Another factor that worked in the favour of Reliance Communications was the state of
the world economy. During the period of Reliance Communications start up, in years
2000 to 2002, the world economy experienced a time of turmoil. There was a deepening
and reinforcing of the global economic slowdown that had begun to set in from the end
of year 2000. According to the IMF estimates, world output recorded a mere 2.4 percent
growth during year 2001, compared to 4.7 percent during year 2000. The growth in
world trade volume also declined sharply to about one percent during year 2001, as
against 12.4 percent in year 2000. The global slowdown was accentuated further by the
terrorist attacks in the United States on September 11, 2001. These ripples were
reflected in the telecommunication industry26.
26
N/A. (2001 – 2002). “Economic Survey – International Economic Enviroment”.
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After a steady growth throughout the 1990s, the United States telecom industry saw a
decline for the first time in ten years in 2001. US imports of telecom equipment recorded
a decline of nine percent, and a decline of seven percent in year 2001 as against year
2000. But in the case of Reliance Communications these negative events had a positive
impact. The world economic and telecommunication meltdown helped Reliance
Communications to negotiate better prices for equipment. Since Reliance
Communications placed huge orders they were in an advantageous position to
command lower prices from nearly all vendors who were trying to push out equipment
from their warehouses. According to internal rumours, Reliance Communications
procured discounts of up to 90 percent on the market prices from vendors like Lucent
and Nortel.
Since the global meltdown ensured rock bottom property prices across India, Reliance
Communications was able to own, lease and rent property required for the offices,
showrooms and equipment installation at minimum cost. Added to this careful planning
ensured that the structures including the telecommunication towers were made and
erected for a minimum cost. The fibre optic cables were procured from Reliance
Industries own factories resulting in further cost reduction. According to the former
Chairman, Mukesh Ambani, Reliance Communications “...capital costs per subscriber
were about 50 to 70 percent lower than those of all new global telecommunications
deployments in recent times”.
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Reliance Communications also exploited loopholes in the Indian telecommunications
policy to cut costs. This problematic episode is discussed further in section 2.4. The
GSM licenses were offered for the four metropolitan cities and eighteen circles after a
tendering and bidding process. These licenses were procured by various mobile
operators from the period year 1995-97 for a license fee as hefty as GBP £ 4 billion.
The new telecom policy in year 1999 reduced this license fee significantly, incorporating
a revenue sharing arrangement. In January 2001, a policy was announced for additional
licenses in Basic and Mobile services. The entry fee for the basic services was fixed at
GBP £ 0.1 million to GBP £ 14.5 million, while for the fourth mobile operator (since in
most circles there were three operators already) it was fixed at GBP £ 0.1 million to
GBP £ 22.5 million, depending on the area of service provision. According to this policy,
WLL service was considered a by-product of basic service and could be provided by a
basic telecom operator at no extra license fee. As Reliance Communications studied the
balance sheets of the existing mobile operators they found that the actual revenue
realisations were far short of projections, leading to mobile operators being unable to
arrange finance for their projects and complete rollouts. This created a vicious circle of
high subscription charges and low penetration for mobile operators. Reliance
Communications ensured this cost would be minimised. All these measures ensured
that the capital and operating expenditures of Reliance Communications were
minimised as compared to its competitors, helping it offer services at cheaper prices.
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2.3 Sales and Marketing Strategy
Reliance Communications radically refined marketing models in India and engaged
homes and enterprises directly by having the ability to deliver physical and virtual
products and services as part of one system. Reliance Communications through its
aggressive, unconventional tactics changed the rules of the mobile marketing game in
India.
2.3.1 Customer Generation – Tapping in to Internal Resources
Reliance Communications targeted internally as it looked for the first set of its
customers. Officials of Reliance Communications realised that an employee base of
more than 50,000 and a shareholder base of about 3.3 million was the best place to
start as far as customers were concerned. Every employee was offered ten connections
at a discounted rate. While the normal monthly charges would be Rs. 600 (GBP £ 8.85),
for the employees they were offered at Rs. 500 (GBP £ 7.35). Many employees bought
connections for their relatives and friends. During the annual general meeting the
Reliance Communications, former, Chairman Mukesh Ambani offered shareholders a
discount package. The company offered a Rs. 850 (GBP £ 12.5) discount on initial
payments on subscription per connection. In addition, the shareholders were offered
free usage worth Rs. 100 (GBP £ 1.50) for six months. This amounted to a total
discount of Rs. 1,450 (GBP £ 21.50) per connection. In addition the shareholders were
encouraged to promote Reliance Communications connections in their circles of
influence. If a shareholder subscribed to two connections, he or she would get free
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usage worth of Rs. 100 (GBP £ 1.50) per connection for twelve months, in addition to
the Rs. 850 (GBP £ 12.5) per connection discount. This amounted to a total discount of
Rs. 4,100 (GBP £ 60) for two connections27.
2.3.2 Dhirubhai Ambani Entrepreneurship Programme – A New Way to
Market
In the case of marketing channels, instead of resorting to the tried and tested means,
Reliance Communications created a completely new model. As a tribute to Dhirubhai
Ambani, the acknowledged icon of a new entrepreneurial wave in India, Reliance
Communications fostered a new breed of entrepreneurs, as channel partners. The
Dhirubhai Ambani Entrepreneur Programme began with an aim of enrolling 200,000
individuals who are committed to acquire new customers and creating a new experience
for them, based on flawless service and feeling of satisfaction28. About 50,000
individuals were recruited in the matter of weeks who were guided and supported by
900 Reliance Communications executives across India. In 673 towns and cities,
Reliance Communications trained these entrepreneurs in basic skill sets, so that they
are able to deliver value to customers at their doorsteps. Reliance Communications
envisaged spending over Rs. 1,000 million (GBP £ 18.5 million) per year in training and
competency building programmes for these entrepreneurs. Through this programme, in
27
N/A. (2003). “Reliance package for shareholders – offers discounts on mobile phone connections”.
28 N/A. (2002). “Reliance Infocomm heralds a new way of digital life for India”.
Reliance Communications Page 29 of 71 Ankit Yadav - 297986
addition to contributing to society by encouraging other enterprises and creating
economic opportunities for millions of young Indian, Reliance Communications also
leveraged goodwill and networks29.
To complement the entrepreneurship Programme, Reliance Communications started
retails outlets in prime commercial and residential areas. In retail spaces ranging from
800 and 2,000 sq ft, in major Indian cities, district headquarters and towns that would
number over 500, the company leased or purchased areas and set up Web-Worlds. At
the Web-Worlds the customer could interact directly with the company officials, see,
touch and try the products and then buy. At the phone stores, the customers could buy
the phones directly across the counter. The company envisaged that ultimately there
would be at least one Web-World in all the towns where Reliance Communications has
a presence30.
The vision of Dhirubhai Ambani – mobile phone in every Indian’s hand – drove Reliance
Communications further to reach out to places hitherto untapped by any telecom
company in India. Reliance Communications aggressively promoted its limited mobility
telecom service by participating in or having partnerships at various shopping malls,
book fairs, community functions, kiosks, letting people have a mobile phone connection.
To build the customer base Reliance Communications went where the customers were
29
N/A. (2002). “About Reliance Developer Program”.
30 N/A. (2003). “Milestones”.
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going – to grocery stores, gas stations, music stores, departmental stores, street side
vendors, bookshops and even hotels and restaurants. To ensure that the product was
available at the customer’s doorstep, Reliance stocked its handsets in about 15,000
outlets across India, while 70,000 outlets in India sold the recharge coupons. Reliance
Communications also appointed 600 exclusive distributors who sold only the pre-paid
offering. Retailers in India like FabMall, PlanetM, HP, Music World and Timex started to
bundle their products along with Reliance India Mobile. Additionally the company
conducted nationwide product demonstrations and announced that the Pioneer offer
would be a limited period offer, which further enhanced the interest of the consumers.
2.3.3 Advertising – Educating Masses and Evoking Passions
Advertising was a marketing strategy which complemented the unconventional use of
channels by Reliance Communications. The Reliance mobile brand was branded as
India Mobile to cash in on patriotic feelings. Bundling of handsets along with the service
– a first time in India – allowed Reliance Communications to resort to a co-branding
exercise with the handset makers. The Reliance Communications brand name was
embossed on every handset which gave it a unique cachet, while the costs of many
advertisements were discounted since they were also borne by the handset makers. A
mega advertisement campaign was launched across the media to mark the launch. The
blitzkrieg coincided with the world cup tournament, ensuring a huge audience. The main
theme of the first campaign was built on the vision of Reliance Communications in
bringing the power of telecommunications to every person in India. This campaign
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helped to educate people on the importance of the telecommunication services. The
next set of campaigns talked about the innovative product features which differentiated
Reliance Communications from its competitors. The advertisements announced that
Reliance India Mobile was ‘Kabhi mobile, kabhi computer’ (Sometimes Mobile,
Sometimes Computer). In the subsequent campaigns Reliance Communications started
riding on movies and cricket as themes.
Overall three observations emerge from the way Reliance Communications handled the
media. Firstly, Reliance Communications built a huge public relations exercise around
the launch of the product. The public relations efforts gave much leverage to the
advertising and gave rise to a word of mouth campaign. Secondly, Reliance
Communications utilised every single media channel very effectively. Reliance
Communications advertised on every TV channel available and in most newspapers,
thus making sure that the product was being promoted across India – a nation very
much divided by language and market conditions. At the peak Reliance
Communications booked around 5,000 spots on 40 TV channels, one million sq ft of
space on hoardings across India and inserted ads in over 70 publications in national
and regional languages. Thirdly, Reliance Communications capitalised on the passions
of Indians when framing the advertisements. The campaigns had an emotional pitch,
piggy backing on Cricket and Bollywood (equivalent of Hollywood in India) thus
effectively connecting with almost every Indian.
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For marketing promotions Reliance Communications again used unconventional
strategies. The mobile service was promoted aggressively through every marketing
channel. Huge signs were put up in front of every gas station and office space in
addition to the prime spots booked across India. The bulk purchase of signboards
ensured that the cost was lower as compared to that available to competitors. Reliance
Communications also utilised their tower by putting up glow sign boards on them which
lit up during the night – an innovative, but cost effective, strategy since most of the
towers were in highly populated and visible areas.
2.3.4 RWorld – Reliance Way of Putting the World in Your Hands
Another important marketing strategy that Reliance Communications used was product
differentiation by mixing data applications with voice. Through RWorld – an inbuilt Java
enabled feature of all Reliance phones – the company guaranteed download speeds of
up to 144 kbps from an applications suite which has over 120 applications ranging from
interactive guides such as TV programme guides and city guides, live news and TV
news clips from Indian news channels like NDTV, CNBC, Aaj Tak and India TV to
contests, video songs, ring tones, cricket information, women’s world and kids world.
Reliance Communications did not stop at this. Through the Dhirubhai Ambani
Developers Programme (www.dadp.com), it aimed at opening Reliance
Communications platform, on an open source basis, so that ideas can be converted into
applications – where the power of thousands of minds could be harnessed to create
unique products and services. These Dhirubhai Ambani Developers converted ideas
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into products as Reliance Communications provided the infrastructure, unlimited access
to comprehensive technical documentation and support and special rate plans designed
for the developer community. According to Reliance Communications, this programme
was aimed at creating wealth for 100,000 young developers who could leverage their
success in India to win markets globally. Over 16,000 individual developers and 800
Independent Software Vendors (ISVs) in addition to scores of small and medium
enterprises have so far enrolled in the programme.
2.3.5 Product Innovations – Connecting with Every Section of Society
Reliance Communications leveraged its product innovations skills, applications
development skills and partnerships to find new solutions to conventional and
contemporary problems – from managing queues in temples, and connecting all police
stations, to delivering e-governance solutions to citizens. Reliance Communications
applications also facilitated the provision of educations and health to rural areas at an
affordable prices. Reliance Communications attempted to offer something for every
section of the society. In a significant initiative to connect with the huge farmer and
trader community of India, communities that are traditionally left out of
telecommunications strategies, Reliance Communications brought the Mandi (market)
onto mobile handsets. The company tied up with National Commodity & Derivatives
Exchange Limited (NCDEX) to disseminate its spot and future commodity prices
through its RWorld suite of mobile applications. “The joint venture is a major step taken
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by NCDEX and Reliance Communications in providing a convenient way to access
commodity prices,” said Mr Narendra Gupta, Chief Business Officer, NCDEX Limited31.
To tap into the retailer community Reliance Communications deployed India’s first
wireless Point of Sale (POS) terminal for processing credit card transactions in July
2003 in association with HDFC Bank – an important milestone in the history of retail
credit in India. Wireless POS enabled banks to expand exponentially the number of
merchant outlets accepting credit cards and speed up penetration of credit card
services to smaller towns. To connect with vehicle providers Reliance Communications
introduced the Vehicle Tracking System. Reliance Communications Vehicle Tracking
system provided real time tracking and monitoring of road consignments and vehicles
across India from anywhere and anytime32.
Through RConnect services, Reliance Communications offered India’s only nationwide
wireless Internet connectivity by leveraging its pan-India high speed CDMA2000 1 X
wireless network. RConnect helped Reliance Communications to connect to the
growing community of Internet users, enabling Reliance Communications to gain over
300,000 subscribers in less than seven months. Subscribers could connect to Internet
‘on the move’ at data speed of up to 144 kbps from their laptops or other mobile
computing devices using an RConnect cables with their Reliance phones.
31
N/A. (2004). “Reliance Infocomm brings MANDI on mobile phones”.
32 N/A. (2003). “Reliance Infocomm successfully deploys India’s first wireless POS terminal for credit card
processing”.
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2.3.6 Customer Service – Icing on the Marketing Cake
Reliance Communications followed up the product innovation and marketing tactics with
good customer service. A 24/7, 365 days a year customer service was set up in a
central location in Mumbai. Taking into consideration the languages and cultural
diversity of India, customer service was offered in ten languages. This ensured that
many customers, who are primarily people without much fluency in English, have a
smooth experience. Additionally the company set up customer service departments in
every town and tied up with 10,000 retail chain services. While other mobile operators
took more two days for initial service provision, Reliance Communications ensured that
customers could walk into any of its retail outlets and buy a fully provisioned mobile
phone within fifteen minutes.
2.4 Tackling The Problem Phase
The success of Reliance Communications and its impact on the Indian mobile
telecommunications industry does not mean that the growth of the company was
without problems. Control issues and performance problems forced Reliance
Communications to phase down the Dhirubhai Ambani Entrepreneurs, who paid around
Rs. 10,000 (GBP £ 147) each to obtain dealerships, to a few thousands by April 2003,
about a year after the launch33.
33
N/A. (2003). “Reliance Info to phase down Dhirubhai Ambani Scheme”.
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Reliance Communications was much criticised for circumventing many of the existing
telecommunication policies in a ruthless manner. According to the Telecom Regulatory
Authority of India (TRAI), WLL mobility should be within the local area, that is in a range
of about 20-25 kilometres with no roaming. Reliance Communications overcame the
policy shackles and roaming problems associated with limited mobility by enabling
customers to use the same handset in areas other than where it was registered.
Through a multiple registration scheme, it provided connection to the Reliance
Communications network in other areas. This led the Department of Telecom (DoT) to
issue a notice to Reliance Communications to discontinue offering roaming like services
on its WLL mobile phones. Reliance Communications got into many more legal
difficulties with the policy-making body, the incumbent operator and the other operators
in the Indian telecommunication sector. But eventually strong political clout and lobbying
saw it through. Though opposed by the GSM Cellular lobby, based on the
recommendation of the TRAI, as approved by the group of Ministers on telecom and
then the cabinet, the Unified licensing was introduced in India, benefiting Reliance
Communications the most. The Unified licensing allowed Reliance Communications,
which held the Limited Mobility license, to migrate to the new regime to offer both basic
and mobile services, putting it on a par with the other operators in India34.
The Monsoon Hungama scheme fetched one million applications within the first ten
days of its launch, but this did not happen without problems. “This unprecedented
34
N/A. (2003). “DOT asks Reliance Info to stop roaming, multiple registration”.
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response gave rise to logistics, billing and collection problems” said by the former
Chairman, Mukesh Ambani, at the Reliance Industries’ annual general meeting.
Reliance Communications provisioning for bad debts for the year 2003-2004 amounted
for sixteen percent of service revenues, among the highest in the industry, according to
telecom experts. “This lends credence to the rumours in the market that many
customers were cheating the company by disappearing, not paying up, not even
receiving bills, and so on,” said an analyst with a brokerage firm35.
Reliance Communications also saw a leadership crisis emerge between the Chairman –
Mukesh Ambani and Vice Chairman – Anil Ambani, when Anil Ambani claimed an
independent stake in the running of Reliance Industries. The crisis emerged during
March 2004 and assumed a high profile in media and public spaces during December
2004. April 2004 to June 2005 witnessed a situation where Mukesh Ambani, who until
then led every decision at Reliance Communications, withdrew from day-to-day
operations, focusing on untangling the crisis. As a result Reliance Communications
slipped to the second place in the terms of subscriber numbers among the Indian
mobile operators36.
Still, Reliance Communications played a major role in ushering in a new era in Indian
telecommunications. Despite the problems, Reliance Communications remains one of
35
N/A. (2004). “Relinace Info bad debts at 16pc of service revenues”.
36 N/A. (2004). “The Ambani fight began in 2003”.
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the front runners in the Indian telecommunication industry. The marketing channel
problems have been tackled and the company currently has a strong mix of own and
outside channels including Dhirubhai Ambani entrepreneurs, direct sales agents,
retailers, Web-Worlds and Web-World Expresses. Reliance Communications has
licenses to offer telecom services in twenty out of twenty two circles under the Unified
Access license. In addition, it has received a letter of intent from the Jammu and
Kashmir circle. This has enabled the company to offer services across the length and
breadth of India’s vast geography through its next generation fibre optic network
backbone spanning 60,000-route km. Reliance Communications has recovered a high
percentage of the bad debts. Also the fact that Reliance Communications had taken out
insurance on the handset it was selling to customers on an instalment basis worked in
its favour.
In January 2004, Reliance Communications acquired 100 percent of the undersea cable
company, FLAG Telecom for GBP £ 155 million. This acquisition provided Reliance
Communications with an international gateway to global markets. The FLAG acquisition
also means that Reliance Communications is the only Indian mobile operator to own an
international undersea cable network with a global footprint37.
Trust in the Reliance mobile brand was confirmed as it emerged as the most trusted
telecom brand in India. The control of the company has been taken by Anil Ambani who
has confirmed Reliance Communications commitment to put the power of information
37
N/A. (2003). “ Reliance signs amalgamation agreement to acquire Flag Telecom Group Limited”.
Reliance Communications Page 39 of 71 Ankit Yadav - 297986
and communications in the hands of all people at an affordable cost. He continues to
believe that this will help empower them and overcome the handicaps of literacy and
lack of mobility.
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3.0 Methodology
3.1 Research Methods
This research is based on primary and secondary data. Self Administered delivery and
collection questionnaires were valuable for obtaining sufficient primary data that has
been quantitatively analysed with consideration of the effectiveness of the
questionnaire. The questionnaire designed for the survey was first pilot tested. The
primary research was designed to collect information from the Reliance Mobile users
and Non-Reliance Mobile Users.
This research collected information from both Reliance Mobile users and Non-Reliance
Mobile users to test the relevance of some of the conclusions drawn from the literature
review. The actual design is detailed in appendix four. The researcher was able to
collect a wealth of information from the questionnaire which was designed for this
research, but also importantly keeping the questionnaire to a reasonable length. By
collecting information from both Reliance Mobile users and Non-Reliance Mobile users
the researcher was able to gain the valuable insight into the perception of each.
The final stage of the primary research was to visit the Reliance Web World in
Ghaziabad, Uttar Pradesh, India on the fifteenth of February 2010. During this visit the
researcher was able to spend a considerable amount of time discussing the Reliance
Communications background, services and facilities offered with both the company
officials and customers present at the Reliance Web World. This helped researcher to
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have a great clarity and understanding of the work being done, as well as validating the
areas that researcher had chosen to study.
For the primary research the researcher sampled eighteen Reliance Mobile users and
twelve Non-Reliance Mobile users, which seems a reasonable figure considering the
logistics involved and the difficulty of contacting and obtaining information from both
Reliance Mobile users and Non-Reliance Mobile users. Considering the explorative
nature of this research and the qualitative information collected the researcher believes
this adequately fulfils the requirements of this research. Overall the researcher would
consider the methodology to have been successful and to have largely drawn the
results and collected the information which was collected.
3.2 Data Collection Techniques
Survey strategy is the most appropriate technique for this research because of its
deductive approach. Survey strategy is also very common strategy in business and
management research. It allows large amount of data from a considerable population in
an economical way. In a survey, data can be easily standardised in the form of
questioning that allows easy comparison and analysis. Survey strategy gives more
flexibility and control over the research. It is also easily understood so survey strategy is
perceived as commanding. The data collected through the survey can be easily
analysed through available statistical programmes.
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3.3 Limitations to the research
The potential problems that might have occurred with the primary research would have
been the collection of primary data as the consumers here in UK are not familiar with
the services and transformation that Reliance Communication brought to Indian
consumers. So to overcome this problem a questionnaire was designed specifically
targeting Indian consumers who are either the users of Reliance Mobile services or are
Non-Reliance Mobile services users and the questionnaire was carried out between
eighth of February 2010 and eighteenth of February 2010 in Ghaziabad, Uttar Pradesh,
India.
The samples of both Reliance Mobile services users (eighteen users) and Non-Reliance
Mobile services users (twelve users) are both relatively small. This small sample size
was a result of the difficulty in contacting Reliance Mobile users (as mentioned in the
methodology); Non-Reliance Mobile users were particularly difficult to contact, as they
did not demonstrate the same enthusiasm compared to Reliance Mobile users. As the
sample size is not statistically significantly, which is the main limitation to the research,
the results can only provide an indication of what may be happening.
The survey for Reliance Mobile service users was designed to include the majority of
questions on Reliance Communication’s role in Indian telecommunications market,
however if the researcher was to do this study again then the researcher would change
this to include equal numbers of questions relating to Reliance Communication’s and
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other players which were involved in the transformation phase of Indian
telecommunications industry.
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4.0 Results and Findings
After carrying out the survey for both the Reliance Mobile users and Non-Reliance
Mobile users the following results have been concluded.
As far as the age group is concerned the majority of the respondents were aged
between eighteen to twenty nine around forty percent of them followed by respondents
aged between thirty to thirty nine around thirty percent of them, twenty percent of the
respondents were aged between forty to forty nine and the last ten percent of the
respondents were aged above fifty. So here we can clearly see the divide between the
users as majority of the user are eighteen to twenty nine which clearly shows that the
Reliance Mobile services are more appealing to younger clientele for graphical
illustration (appendix one).
With reference to the Reliance Mobile user section the responses of the survey
questions, for question one the around thirty two percent of the respondents have
replied that they are using Reliance Mobile services for over seven years, followed by
the new addition of around twenty nine percent which have started using Reliance
Mobile services in last one to two years, around twenty one percent of respondents
have replied that they have been using the Reliance Mobile services for three to four
years and finally there are about eighteen percent respondents which replied that they
have been using Reliance Mobile services for about five to six years for graphical
illustration (appendix one).
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In question two, respondents were asked how they heard about the Reliance Mobile
services so around fifty percent of replies were related to adverts which were further
broken down into sub-categories of newspaper ads which amount for twenty percent,
Television ads which amounted for twenty five percent and Magazines ads which
amounted for five percent. Rest of the respondents to this question replied that they
were introduced to Reliance mobile services by their friends around fifteen percent and
around thirty five percent of respondents were introduced to Reliance Mobile services at
the company share holder meeting. If we try and relate these responses to literature
review section – customer generation – tapping into internal resources and advertising –
educating masses and evoking passions so we can clearly see the strategies which
were used by Reliance Communications clearly worked for the company for graphical
illustration (appendix one).
In question three, respondents were asked what was the reason behind their choice of
Reliance Mobile services over other service providers? In reply majority of respondents
around forty percent said because of value for money, followed by thirty five percent of
respondents which replied because of offers and bundles and around twenty percent of
the respondents replied because of the brand image of parent company. So here also if
we try and relate the literature review section – pricing strategy – Dhirubhai Ambani
Pioneer offer, Monsoon Hungama scheme and the vision of the founder to make latest
telecommunication technologies available to every Indian for price of a post card have
also helped the company to win customers and their loyalty towards the company and
the ‘Out of Box’ thinking used by the company as well for graphical (appendix one).
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In question four, respondents were asked in what way do think that Reliance mobile
services are better than its competitors? In reply majority of respondents around thirty
percent said due to customer service and same amount of respondents said because
Reliance Communications also keeps up with the new technological trends and make
them available cheap to its customers than any other service provider. So if we try and
relate these responses to the literature review section – customer service – icing on the
marketing cake where Reliance communications introduced a 24/7 and 365 days a year
customer service where company considered the language and cultural diversity of
India and introduced the service in ten languages as this ensured that many customers,
who are primarily people without much fluency in English, have a smooth experience.
So this strategy also worked in the favour of Reliance Communication. The rest of the
respondents around twenty percent said because of the transparency in tariffs and
service quality offered by Reliance Communications was the major factor for them to
conclude that Reliance Mobile services are better than its competitors for graphical
illustration (appendix one).
In question five, respondents were asked if they think that Reliance Communications
have transformed the Indian mobile industry since its launch. In reply vast number of
respondents replied yes around seventy five percent of them, around fifteen percent of
them replied no and rest of them replied not sure around ten percent for graphical
illustration (appendix one).
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In question six, respondents were asked according to them which telecom company in
India is the biggest competitor of Reliance Communications? In reply majority of
respondents around forty percent of them said that Bharti Airtel is the biggest competitor
followed by companies like Vodafone twelve percent, Tata Communications ten
percent, Aircel eleven percent, Idea Cellular and Tata Teleservices six percent each
followed by Virgin Mobile four percent and NTT DoCoMo two percent. Here if try and
relate this figure to the actual figures released by the Telecom Regulatory Authority of
India (TRAI) in appendix five we can see the clear difference as Bharti Airtel has over
110 million subscribers and Reliance Communications have just over 86 million
subscribers for graphical illustration (appendix one).
In question seven, respondents were asked if they think that the strategies used by
Reliance Communications competitors are the reason for the loss of market share by
company. In reply around sixty percent of the respondents said yes, followed by twenty
five percent of the respondents which said no and around fifteen percent of the
respondents said they were not sure about the reason behind this. If we try and relate
this question to recent changes in the market share figures in appendix five released by
TRAI we can clearly see Bharti Airtel is leading the way in the Indian mobile market for
graphical illustration (appendix two).
And finally in question eight, respondents were asked if they are satisfied with Reliance
Mobile service? In reply huge number of respondents around eighty five percent of them
said yes followed by ten percent of respondents said no and rest of the respondents
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around five percent were not sure. So here also we can see majority of the respondents
are satisfied with the Reliance Mobile service with a very small figure of respondents
disagreeing for graphical illustration (appendix one).
With reference to the Non-Reliance mobile user category, the first question in this
section is to identify if the respondent actually uses the mobile phone as part of his/her
job or at home. In reply around ninety percent of the respondents said yes and a small
amount of respondents around said no. The respondents who replied no were
requested to stop and not to carry on with the survey as these respondents were
irrelevant to the survey for graphical illustration (appendix one).
In question two, respondents were asked what mobile network do they use. In reply
around fifty percent of the respondents said Bharti Airtel followed by BSNL ten percent,
Idea Cellular eight percent, Vodafone seven percent, Aircel six percent, Tata
Communications five percent, Tata Teleservices four percent, Virgin Mobile three
percent and NTT DoCoMo two percent. Here also we can see Bharti Airtel is the biggest
competitor of Reliance Communications and this fact is also confirmed by the survey
respondents for graphical illustration (appendix one).
In question three, respondents have been asked the reason why they have chosen the
above service provider in comparison to Reliance Mobile services? In reply around fifty
percent of the respondents have replied the mobile phone service they use is provided
by the company they work for, followed by around forty three percent respondents who
said that they use other service provider because they get a better service somewhere
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else and around seven percent of respondents said the mobile phone service they use
is provided by their parents. In this question two trends emerge company provided and
better service. In this situation Reliance Communications must be failing to deliver the
perfect service and lack of corporate packages for graphical illustration (appendix one).
In question four, respondents were asked would they switch to Reliance Mobile service
if better services and offers are provided to them at lower cost. In reply a large number
of respondents around sixty eight percent replied yes followed by around twenty two
percent of respondents which replied no and around ten percent of respondents replied
that they are not sure. In this situation Reliance Communications have to make efforts
to lure these customer to its network for graphical illustration (appendix one).
And in question five, respondents were asked what steps Reliance Communications
should take to increase its market share? In reply around forty percent of respondents
have said that Reliance Communications should be the first telecom company to
introduce the 3G technology as the Government of India announce the spectrum
allocation, around thirty percent of respondents which replied that there is a need of
more regional call centres as the company have expanded pan-India since its launch in
December 2002. Followed by twenty percent of respondents which said Reliance
Communications should offer more offers and rest of the respondents around ten
percent said Reliance Communications should provide better service than its
competitors for graphical illustration (appendix one).
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5.0 Conclusions
Reliance Communications stimulated telecommunication growth in India by challenging
many of the conventional practices in product design, distribution, sales, advertising and
pricing. Reliance Communications fashioned a strategy which was conceptually simple
but sweeping in its impact. While the competitors focused on the top segment of the
market, by charging a premium price, Reliance Communications sought to reduce the
cost to the consumer, thus focusing on a market driven by volume. While others saw
weakness of India as a market – widespread poverty an low levels of
telecommunication penetration – and Reliance as an old economy company focusing on
oil production and business-to-business clients – Reliance Communications realised
that these actually were strengths which it could tap into. Reliance Communications
managers saw that telecommunications would be much valued by the poorer sections
of society if it could be used to create opportunities and offered at affordable prices. The
company tapped into its strong political and financial clout to build up a strong
organisation that could push it through the legal and regulatory setup in India.
Reliance Communications is planning to consolidate its telecommunications evolution
through phases:
Firstly, the mobile revolution now reaching over 80 million subscribers will expand to
640,000 villages and to over 5,000 cities and towns. This revolution will create the
potential for every individual to talk, learn, shop, bank, transact, entertain and be
informed, while on the move.
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Secondly, an enterprise Net-way revolution will bring the possibility to provide
broadband experience to every desktop and device in half a million enterprise buildings
initially and eventually to millions of commercial buildings. This will create the potential
to empower every enterprise by making transactions efficient, functions seamless and
new economic opportunities abundant.
And thirdly, a convergence revolution will provide high-speed networks to millions of
homes. This revolution will offer every home access to a wide range of television
channels, high-speed telephony, audio conferencing, videoconferencing and video on
demand.
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6.0 Recommendations
After carrying out the research on role of “Reliance Communications strategy and its
impact on the Indian mobile telecommunications industry” following recommendations
have been concluded:
Reliance Communications have been maintaining their position as the second largest
mobile operator in India with its 86 million subscribers since September 2009 and Bharti
Airtel leads the way as the number one mobile service operator with its 110 million
subscribers. Indian mobile services market is very dynamic in nature and it is changing
very rapidly as more and more new entrants are entering the market with attractive price
plans and service bundles to gain market share for the established service providers
like Reliance Communications.
To weather this storm of new operators entering the Indian mobile market and stop
them from luring the valuable customer base of the company Reliance Communications
have to adapt new practices like offering new deals to corporate clients, offer new
payment plans, offer enhanced value added services to its product portfolio and
promote innovation and idea generation throughout the organisation. If the company
fails to take action on time regarding the market situation, the company poses a risk of
being either taken over by small players (in accordance of market share) or becoming
the victim of the industry which once it ruled.
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Reliance Communications should adapt to following mobile features so the company
creates an edge over its competitors:
Reliance Communications should bring total transparency and therefore, offer a per
second pulse. As the customer will only pay for the second they use therefore,
customers only pay for what they use. The current charge is on per minute basis and
the customer loses the unused seconds. For example, at present if a customer makes a
twenty second call and they have to pay for one minute because the current mobile
service providers have a sixty second pulse. So customers using Reliance
Communications network will only have to pay for the seconds they use not for the
whole minute. International calls have always been high cost calls, so they should also
be charged as per second pulse rather than per minute pulse.
Pre-activated national and international and national roaming without rental should be
offered as standard to all customers so they can talk to their friends and family who are
based out of the town or out of country without have to worry about the connection
problems as some of the service might be restricted on their phones. Anywhere in India
top-up should be offered to customers so they can top-up their accounts with any
desired amount between Rs. 10.00 to Rs. 10,000.
Reliance Communications Page 54 of 71 Ankit Yadav - 297986
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Reliance Communications Page 58 of 71 Ankit Yadav - 297986
Appendices
Appendix – 1 – Questionnaire results:
Sample age group:
Reliance Mobile user category:
Q – 1 How many years have you used Reliance Mobile Services?
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Q – 2 How did you hear about Reliance Mobile Services?
Q – 3 What was the main reason for you to choose Reliance Mobile
services over other service providers?
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Q – 4 In what aspects do you think that Reliance Mobile Services are better
than its competitors?
Q – 5 Do you think that Reliance Communications have transformed the
Indian Mobile industry since its lauch?
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Q – 6 From the following telecom companies which one do you reckon is
the biggest competitor of Reliance communications?
Q – 7 Do you reckon the strategies which were used by Reliance
Communications competitors are the reasons for the loss of market share
by company?
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Q – 8 And finally, are you satisfied with Reliance Mobile services?
Non-Reliance Mobile user category:
Q – 1 Do you own/use a mobile phone either part of your job or at home?
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Q – 2 What mobile network do you use?
Q – 3 Why have you choosen the above mobile service provider in
comparision to Reliance Mobile services?
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Q – 4 Would you likely to switch to Relinace Mobile services if the offers
and/or better are provided to you for lower cost?
Q – 5 And finally, according to you what Reliance Communications can do
to increase its market share and improve its services?
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Appendix – 2 –Fifth largest telecom operator in the world:
(Source: Reliance Investor Presentation 2009)
Appendix – 3 –Targets the largest untapped population in the world:
(Source: Reliance Investor Presentation 2009)
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Appendix – 4 – Questionnaires
Appendix – 4.1 Reliance Mobile User Category Questionnaire:
Q – 1 How many Years have you used Reliance Mobile services?
1 – 2 Years ( )
3 – 4 Years ( )
5 – 6 Years ( )
7 + Years ( )
Q – 2 How did you hear about Reliance Mobile services?
Adverts ( )
- Newspaper Ads ( )
- Televison Ads ( )
- Magazine Ads ( )
Friends ( )
Company share holder meeting ( )
Q – 3 What was the main reason for you to choose Reliance Mobile services over other
service providers?
Value for money ( )
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Offers and Bundles ( )
Brand image of parent company ( )
Q – 4 In what aspects do you think that Reliance Mobile services are better than its
competitors?
Customer service ( )
Service quality ( )
Transparency in tariffs ( )
Keeping up with latest technological trends ( )
Q – 5 Do you think that Reliance Communications have transformed the Indian mobile
industry since its launch?
Yes ( )
No ( )
Not Sure ( )
Q – 6 From the following telecom companies which one do you reckon is the biggest
competitor of Reliance communications?
Bharti Airtel ( ), BSNL ( ), MTNL ( ), Tata Communications ( ), Aircel ( ), Idea Cellular
( ), NTT DoCoMo ( ), Tata Teleservices ( ), Vigin Mobile ( ), Vodafone India ( ).
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Q – 7 Do you reckon the strategies which were used by Reliance Communications
competitors are the reasons for the loss of market share by company?
Yes ( )
No ( )
Not Sure ( )
Q – 8 And finally, are you satisfied with the Reliance Mobile services?
Yes ( )
No ( )
Not Sure ( )
Please Stop here. Thank you for you time in filling out this questionnaire.
Appendix – 4.2 – Non-Reliance Mobile User Category Questionnaire:
Q – 1 Do you own/use a mobile phone either part of your job or at home?
Yes ( )
No ( ) – please stop here.
Q – 2 What mobile network do you use?
Bharti Airtel ( ), BSNL ( ), MTNL ( ), Tata Communications ( ), Aircel ( ), Idea Cellular
( ), NTT DoCoMo ( ), Tata Teleservices ( ), Vigin Mobile ( ), Vodafone India ( ).
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Q – 3 Why have you choosen the above mobile service provider in comparision to
Reliance Mobile services?
Better service ( )
Company provided ( )
Provided by parents ( )
Q – 4 Would you likely to switch to Relinace Mobile services if the offers and/or better
are provided to you for lower cost?
Yes ( )
No ( )
Not Sure ( )
Q – 5 And finally, according to you what Reliance Communications can do to increase
its market share and improve its services?
More offers ( )
Better service ( )
Regional call centres ( )
Introduce 3G technology ( )
Please stop here. Thank you for time your in filling out this questionnaire.
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Appendix – 5: Subscriber numbers (millions) by service provider
Service
Provider
June 2003
After
Pioneer
Scheme
Sep 2003
After
Monsoon
Hungama
Dec 2003
One Year
After
Launch
Mar 2004
After Pre-
Paid
Launch
Mar 2005
One Year
After Pre-
Paid
Sep 2009
Current
Scenario
in Market
RCOM 1.82 4.20 6.24 7.26 10.45 86.12
Bharti 3.75 4.62 5.50 6.50 10.98 110.51
BSNL 3.19 4.04 4.94 5.53 9.90 58.76
Vodafone 2.62 3.22 3.77 5.15 7.80 82.85
MTNL 0.29 0.31 0.42 0.46 1.08 4.68
BPL 1.17 1.31 1.54 1.88 2.58 2.50
TATA 0.2 0.4 0.56 0.63 1.09 46.80
Total 17.32 23.03 28.44 33.69 52.22 471.73
(Source: TRAI Documentation)
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Appendix – 6: Strategy Competitive Advantage
Competitive Advantage - Definition
A competitive advantage is an advantage over competitors gained by offering
consumers greater value, either by means of lower prices or by providing greater
benefits and service that justifies higher prices.
The differentiation and cost leadership strategies seek competitive advantage in a
broad range of market or industry segments. By contrast, the differentiation focus and
cost focus strategies are adopted in a narrow market or industry.
(Source: Tutor2u.net)