News Reliance Communications Strategic Management Swot Analysis
Company Overview
India's Reliance Group operates throughout the solid ground in addition to across the spectrum of wireless, wireline in addition to long-distance voice, data, video in addition to meshing communications services. Reliance also has an international presence via its submarine cable network infrastructure, which connects xl countries from the States to Europe, the Middle East, India, South Eastern Asia in addition to Japan.
The operator is split upward into iii draw organisation units, namely Wireless, Global in addition to Broadband. Reliance offers wireless services through its CDMA (20 circles) in addition to GSM networks (eight circles). In 2009, the carrier also announced the launch of a pan-India GSM network.
Reliance's Global Unit offers national in addition to international long-distance calling services, mainly on a wholesale basis. The operator has some retail services alongside a pregnant ILD draw organisation inwards the UK, Canada, the US, Commonwealth of Australia in addition to New Zealand. The operator's managed network services are available inwards to a greater extent than than 40,000 locations across 163 countries. Reliance also owns 22,000kms of underground fibre network inwards the States inwards fourteen metros, allowing the fellowship to offering its customers seamless end-to-end connectivity to these fundamental draw organisation markets.
Within India, Reliance is also a pregnant broadband operator, offering enterprise voice, data, video in addition to meshing services.
In August 2008, Reliance launched nationwide satellite TV services nether its wholly owned subsidiary Reliance Big TV Limited. These services are available on the DTH format to consumers inwards India. Reliance Big TV is available at to a greater extent than than 100,000 outlets across 6,500 towns inwards the country. At the goal of Dec 2010, it reported having 3.3mn subscribers, representing 11% of India's DTH market.
Recent Financial Results
Reliance Communications reported full revenues of INR50.041bn inwards the iii months ended Dec 2010, a decrease of 2.2% q-o-q in addition to 5.8% y-o-y. Mobile revenues had a similar weakness over the quarter to make INR40.644bn, downward from INR41.613bn inwards September 2010. Perhaps to a greater extent than worryingly, its quarterly churn charge per unit of measurement increased yesteryear 5pps to 4% inwards Dec 2010. Meanwhile Reliance Communications' blended ARPU vicious yesteryear 9% q-o-q in addition to 25.5% y-o-y to INR111, which partially offset the meshing add-on of 8.315mn subscribers that brought the operator full to 125.652mn inwards Dec 2010. Net turn a profit increased yesteryear 7.7% q-o-q to INR4.803bn, which was the strongest upshot inwards 2010. However, this was downward 56.6% from Dec 2009 in addition to 65.9% from Dec 2008.
Reliance Communications' other draw organisation segments did non fare significantly better, which contributed to the overall decline inwards its full revenues. Revenues from the broadband draw organisation partition vicious to INR6.184bn inwards Dec 2010 from INR6.617bn inwards the previous quarter. Other revenue sources also posted weaker performances in addition to posted a full of INR3.106bn, a 22% decline from September 2010. Reliance Communication's global draw organisation was the alone segment to written report growth after registering a 4.6% q-o-q increment to INR19.233bn.
In the quarter ended September 2010, Reliance Communications posted consolidated revenues of INR51.183bn, an increment of 0.2% from the previous quarter, spell mobile revenue saw a similar growth to INR41.613bn. Although Reliance's blended ARPU continued to tendency downwards to INR122, downward from INR130 inwards the previous quarter, in addition to meshing additions also came inwards weaker at 6.531, compared to 8.384mn, the operator posted a meshing turn a profit of INR44.592bn. This was a pregnant improvement from the previous quarter meshing turn a profit of INR2.509bn, largely due to lower fiscal charges.
Although wires revenue increased to INR41.613bn inwards September 2010, an increment from INR40.100bn inwards the previous year, the operator posted lower revenues for its global, broadband in addition to investment segments. Income from operations vicious yesteryear 10.2% to INR51.183. Meanwhile, all of Reliance's draw organisation segments reported lower meshing profits, alongside its wireless draw organisation revenue declining yesteryear 30.4% to INR7.135bn. Similarly, broadband revenues vicious to INR1.263bn, a decrease of 38.4% y-o-y.
Ownership
In June 2010, Reliance was reported to travel inwards talks alongside South African telecoms fellowship MTN on a bargain to practice i of the world's 10 largest telecoms companies, worth an estimated US$70bn in addition to alongside 116mn subscribers worldwide. The talks were said to remove maintain begun inwards May 2010 after competition Indian operator Bharti Airtel dropped out of negotiations alongside MTN. However, in that place is some confusion surrounding the alleged talks, which remove maintain been denied yesteryear MTN in addition to which would remove maintain to travel approved yesteryear South Africa's regulatory regime earlier existence allowed to proceed.
Reliance offset initiated tie-up talks alongside MTN inwards 2008 inwards what was ultimately a thwarted deal. Meanwhile, Reliance confirmed inwards June 2010 that the company's board had approved selling upward to a 26% stake to strategic or somebody equity investors. The cellco did non give whatever timeframe or details for a possible deal, but according to Reuters, the UAE's Etisalat, MTN in addition to AT&T are potential partners. As noted above, MTN has publicly denied that it is inwards talks alongside Reliance. Meanwhile, AT&T declined to comment on the rumours. Reliance -- the alone major Indian wireless operator without a unusual partner -- is believed to travel peachy on selling the stake to assist address its meshing debt, which stood at INR199bn (US$4.2bn) at the goal of March 2010. In Feb 2010, the operator paid INR85.85bn to buy 3G mobile concessions.
Wireless Network Development
In August 2008, the TRAI ordered the incumbent Indian GSM operators, including Bharti, IDEA, Vodafone, Spice in addition to state-controlled BSNL, to render interconnection alongside Reliance Communications' novel GSM network. India's leading GSM operators had been trying to delay interconnection, claiming that they require to negotiate variety out commercial agreements alongside Reliance, equally their existing interconnection understanding alone covers its CDMA network. The regulator rejected these reasons in addition to has threatened to seek criminal proceedings against the GSM operators if they did non interconnect alongside Reliance equally ordered. The regulator tin levy fines of US$4,600 per 24-hour interval until compliance is reached. The TRAI later announced that all of India's GSM operators had signed an understanding alongside Reliance to resolve all pending issues related to interconnection.
For the fiscal yr ending March 2009, Reliance planned to invest US$6bn next upward on its network roll-out plans. As purpose of its investment pledge, Reliance planned to expand its network to concealment every Indian town alongside a population to a greater extent than than 1,000.
In some other innovative move, in that place are suggestions that Reliance is aiming to buy the farm a global MVNO platform, creating a unmarried network across some lx countries. It is inwards discussions alongside several operators over the possibility of renting capacity from Reliance's network.
In Feb 2009, it was reported that Reliance was planning to launch a rural version of its Net Connect wireless meshing service. The service, which uses the operator's CDMA network to render meshing access at speeds of upward to 144kbps, is currently available inwards to a greater extent than than 20,000 towns, alongside prices starting at INR650 (US$13.28) per month. It plans to offering the rural service at well-nigh INR500 per month. Reliance volition partner alongside Huawei for the roll-out.
In March 2009, Reliance announced the launch of a novel wireless broadband service, which it claims volition travel the fastest inwards Republic of Republic of India to date. The novel service, marketed nether the Reliance Netconnect Broadband Plus banner, is based on CDMA technology, in addition to it volition render downstream speeds of upward to 3.1Mbps in addition to upstream speeds of upward to 1.8Mbps. Initially it volition travel available inwards 35 cities, including Guntur, Hyderabad, Kakinada, Bangalore, Mysore, Bombay in addition to Delhi. The operator said that it expects ARPU from the novel service to travel simply about INR600-850 (US$11.44-16.21) per month; ARPU on Reliance's existing wireless meshing offering, Reliance Netconnect, is reportedly betwixt INR500 in addition to INR800 per month. The novel broadband connections volition cost betwixt INR299 in addition to INR1,750 per month.
In September 2009, Reliance announced plans to revive the IPO of its towers unit of measurement in addition to could enhance US$900mn for a 10% stake. Reliance Infratel, operating to a greater extent than than 48,000 telecoms towers, is to file an application alongside the country's uppercase markets regulator. However, these plans were shelved after Reliance agreed to merge alongside GTL Infrastructure.
That said, the mobile tower bargain betwixt Reliance in addition to GTL collapsed after both parties failed to make an understanding on terms. The bargain would remove maintain reduced Reliance's debt yesteryear US$3.9bn in addition to created a fellowship alongside 80,000 towers in addition to an enterprise value of US$11bn. The fellowship has been unsuccessful inwards selling its 26% stake inwards lodge to trim down its debt burden but it was reported yesteryear the Economic Times that Reliance could enhance upward to US$500mn yesteryear selling bonds through Reliance Globacom.
In Jan 2011 Reliance Communications was reportedly inwards talks alongside iii operators to constitute a 3G roaming alliance. Local rivals such equally Bharti Airtel, IDEA Cellular in addition to Vodafone Essar were finalising a strategic understanding to offering 3G services on a pan-India grade bar Odisha state.
Wireline Network Development
In Feb 2007 Vodafone unveiled a high-growth five-year strategy for India, which involved bringing ultra-low-cost handsets in addition to wireless connectivity to rural Republic of Republic of India equally good equally contributing to community development. Vodafone has made the availability of low-cost handsets a pith purpose of its Indian strategy. Its basic thesis is to brand mobile telephony to a greater extent than affordable to to a greater extent than Indian consumers. It is able to capitalise on its seat equally a major international fellowship inwards lodge to practice this. The operator is also channelling several billion dollars of investment into rural Republic of Republic of India on the dorsum of network-sharing agreements alongside operators such equally Bharti Airtel in addition to IDEA Cellular.
The Reliance network encompasses 24,000 towns, 600,000 villages in addition to all major railway routes in addition to highways, which concealment 90% of the country's population. The national inter-city long distance network consists of to a greater extent than than 160,000 route kilometres of ducted fibre-optic cables. The entire inter-city in addition to underground fibre oculus backbone network is deployed inwards a 'ring in addition to mesh' architecture in addition to is MPLS-enabled. The Reliance Data Network has to a greater extent than than 180 MPLS integrated network nodes.
In a farther investment plan, Reliance announced it volition inject US$500mn inwards the edifice in addition to acquisition of WiMAX networks across Asia, Europe, Latin America in addition to Africa, equally purpose of its buy of eWave World, a London-based operator alongside WiMAX licences inwards several countries. It hopes to launch services inwards some other thirty countries yesteryear 2012 (eWave already serves twenty countries).
The operator has already outsourced the management of its wireless networks, having inked a bargain alongside Alcatel-Lucent Managed Solutions inwards July 2008; RCOM holds simply about 33% of the articulation venture (JV). In the initial stage of the JV, betwixt July 2008 in addition to September 2008, it handled CDMA in addition to GSM operations in addition to maintenance for 5 circles for RCOM. In the instant stage from Oct 2008, RCOM handed over the residual of India's operations. Within its offset yr of operation, it claims the JV has achieved operational cost savings of betwixt 20% in addition to 25%.
In July 2009, Reliance revealed that it was considering outsourcing the management of its fixed-line in addition to broadband services equally it looked to cutting costs. It is believed that the operator could finalise a contract for the outsourcing inside the side yesteryear side iii to 4 months, alongside whatever bargain worth to a greater extent than than an estimated US$1bn. Commenting on the possible course of didactics of action, Sandip Biswas, caput of managed services at RCOM, said: 'We desire to outsource the management of our optic-fibre, broadband in addition to fixed draw services. We are inwards discussions alongside interested parties in addition to should travel able to finalise it inwards the side yesteryear side iii months'.
In May 2010, India's Economic Times paper reported that RCom was laid to launch IPTV services inwards Delhi in addition to Bombay inside the side yesteryear side iii months. The paper cited comments made yesteryear RCom's CEO (DTH in addition to IPTV) Sanjay Behl. 'We conception to commence our proposed IPTV service initially inwards Delhi in addition to Bombay inwards the side yesteryear side iii months. In the instant stage nosotros also remove maintain plans to innovate it inwards half-dozen other cities', Behl said.
Strategy
Like Vodafone, Reliance has pursued a strategy that seeks to expand mobile telephony inside rural Republic of Republic of India using low-cost handsets in addition to flexible prepaid tariffs. It, too, has been implementing a major network expansion programme that seeks to combine the benefits of both GSM in addition to CDMA technologies. Reliance is looking to challenge the authorisation of state-owned BSNL inwards rural regions, alongside the fellowship stating it aims to capture 30% of the rural meshing subscriber base of operations inside i year.
Like its major competition Bharti, Reliance also has ambitious plans for Sri Lanka. In Apr 2008, it was reported that Reliance had formed a articulation venture, named Reliance Mobile Lanka, alongside local theatre Electroteks. The fellowship intended to commence offering GSM services inwards Sri Lanka earlier end-2008.
SWOT Analysis
Strengths:
• Fully integrated service provider offering local (fixed wireless), mobile, long-distance in addition to meshing services, in addition to IPTV
• India's second-biggest wireless operator, having surpassed the 117mn subscriber score yesteryear the goal of September 2010
• Strong meshing turn a profit growth driven yesteryear increases inwards its mobile subscriber base
Weaknesses
• Migration to increased prepaid usage has an deportment on on ARPU in addition to non-voice revenue size
• GSM client base of operations withal low, at simply less than 17%, but this is probable to modify equally • Reliance invests inwards its GSM network
Opportunities
• Deployment of FLAG in addition to FALCON cable networks gives the operator a global presence
• High-speed mobile network enables pregnant value-added revenues from mobile content
• Approval for nationwide GSM services gives Reliance the chance to extend GSM subscriber base
Threats
• Need to invest heavily towards expanding inwards rural Republic of Republic of India could deportment on profitability in addition to practice a require for network-sharing agreements
• Investment necessary inwards extending GSM network could hitting profitability inwards the curt term
• Vodafone Essar continues to grow its subscriber base of operations and, alongside its investment programme, could presently grab upward alongside Reliance.