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.
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.
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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 2010.
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 look at the cost strategies adopted by the Reliance Communication, while the third part looks at the creative ways in which the process of marketing value added to the process.
The hypothesis of this dissertation is to test if the strategic route taken by Reliance communication was 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 were the factors for huge success; and also if in any way Reliance Communication used its power as a big business empire against its competitors unlawfully.
Core objectives of this dissertation are:
- investigate Reliance Communications role in transformation of 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 were used by the competitors to gain the market share; and
- investigate how Reliance communication could have used different strategies.
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) 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' offer.
Always on Time
Marked to Standard
What sets Reliance Communications apart from its competitors is the fact that nearly 90 percent of their handsets are data-enabled, and can access hundreds of Java 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 differentiators.
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.
2.0 Literature Review
During the search for literature search engines like 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
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 to earn leadership for India in the knowledge age. Reliance Communications aimed to create new paradigms in enterprise, entrepreneurship and engagement.
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 91% of the country's national highways 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 India.
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 250 (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 Communications.
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 India. 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 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 capture.
2.2.1 Dhirubhai Ambani Pioneer Offer - Democratising Mobiles
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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 15-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 15 seconds. The cost of a national long-distance call to any Reliance phone in India was 40 paisa (0.8 GBP £ pence) for a minute. 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 initially.
“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 Communications.
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 service.
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 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 charges.
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 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 services.
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 - vanished.
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. 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 minute.
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. 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 operators.
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 management.
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 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 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 industry.
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”.
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.
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 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 connections.
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 satisfaction. 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 addition to contributing to society by encouraging other enterprises and creating economic opportunities for millions of young Indian, Reliance Communications also leveraged goodwill and networks.
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 presence.
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 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 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.
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 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 by NCDEX and Reliance Communications in providing a convenient way to access commodity prices,” said Mr Narendra Gupta, Chief Business Officer, NCDEX Limited.
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 anytime.
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.
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 launch.
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 India.
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 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 firm.
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 operators.
Still, Reliance Communications played a major role in ushering in a new era in Indian telecommunications. Despite the problems, Reliance Communications remains one of 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 footprint.
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 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.
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 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. I was able to collect a wealth of information from the questionnaire that I 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 I was able to gain the valuable insight into the perception of each.
The final stage of my primary research was to visit the Reliance Web World in Ghaziabad, Uttar Pradesh, India on the fifteenth of February 2010. During this visit I 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 me to get a great clarity and understanding to my work, as well as validating the areas I had chosen to study.
For my primary research I 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 my research and the qualitative information collected I believe this adequately fulfils the requirements of this research. Overall I would consider my methodology to have been successful and to have largely drawn the results and collected the information I 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 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. And the data collected through the survey can be easily analysed through available statistical programmes.
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.
My 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 methodology); Non-Reliance Mobile users were particularly difficult to contact, as they did not demonstrate the same enthusiasm compared to Reliance Mobile users. As my sample size is not statistically significantly, which is the main limitation of my research, my 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 I was to do this study again I would change this to include equal numbers of questions relating to Reliance Communication's and other players which were involved in the transformation phase of Indian telecommunications industry.
4.0 Results and Findings
After carrying out the survey for both the Reliance Mobile users and Non-Reliance Mobile users 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 please refer to appendix one.
If we go through the Reliance Mobile user section and start looking at 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 please refer to appendix one.
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 please refer to 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 illustration please refer to appendix one.
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. 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 please refer to 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 please refer to appendix one.
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 please refer to 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 please refer to 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 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 please refer to appendix one.
Now if we go through 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 please refer to 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 please refer to 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 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 please refer to 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 please refer to 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.
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.
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 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.
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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