http://economictimes.indiatimes.com/Opinion/Interviews/Safawis-target-100-m-more-RCOM-users-in-1000-days/articleshow/5761997.cms?curpg=1 Syed Safawi is just 100 days into the corner room of Reliance Communications, but he has already launched a strategic shift at India’s second-largest mobile phone firm. The chief executive officer (wireless business) says the tariff war plaguing the companies could well be over because new launches are getting more rational on the tariff front. Putting employees on top of the priority list, he has redefined winning as improving the revenue market share to 20% over the next three years from the current 12%. RCOM has set itself a target of getting its next 100 million customers in 1,000 days, which Mr Safawi believes can be achieved with its current pace of growth. Mr Safawi is changing the compensation structure in the company with an emphasis on target-linked pay across the board. The rewards and variables will no longer be on annual basis, but quarterly, he tells ET in an exclusive interview. Excerpts: It has been 100 days since you took over. What is your take on RCOM? We have mapped out where we were as a company, and having figured that, have chalked out a strategy of where we want to go, and how to get there. We have launched R2.0 — R stands for resurgence, reformation, revival and even Reliance, while 2.0 is the new version of the company. We are on a transformation journey, a 360 degrees initiative of being new. Is the new strategy, R2.0, born out of the realisation that RCOM was losing market share? Reliance topped subscriber additions in the first three months of last year, but since then has slid down. It is beyond that. R2.0 is about a change in strategy. We wanted to see if customers were the benchmark, or if it is something larger than that. R2.0 will measure our business health differently. We have just unleashed a new vision for RCOM, which we will make public within the next week to 10 days. Just what will change? We defined winning differently. Earlier, winning was all about customer market share, but now it will be only about incremental revenue market share leadership — this is a change in the way RCOM operates. We have defined nine strategic pillars and six enablers , which will get us there and also laid down the measures to define success. For example, some of the nine strategic pillars are say distribution — we are new into GSM, have a long way to go and therefore must enhance distribution. In CDMA, it is about value creation . Here, it is linked to handset and how do we play the handset game. Another critical pillar is people. Enhancing our network, customer experience are some of the enablers that will get us there. Everybody in the organisation will be measured against these parameters. RCOM has also automated its operational structure. A person sitting in Mumbai can see national, regional, local, cluster level and even picture what is happening at the site. If my traffic/customer base is dropping, or revenues are coming down at the site level, this can now be measured. Revenue market share has to come from the traffic and customer market share at each site — the performance of the organisation is a buildup of that. Next big change is everybody in the organisation, from foot soldier to the CEO, will have a significant portion of their salaries linked to meeting revenue market share leadership targets. This will no longer be calculated annually, but on a quarterly basis. If you are in a hyper competitive environment, you have to win every day and an annual performance linked incentive is therefore irrelevant. We have further empowered our employees as their performance targets and data are all SMS linked — the employee can pull out his performance data via SMS, evaluate where he stands and calculate his reward. How will RCOM attract better talent? The industry perception that the best of talent does not go to Reliance , is this a concern? The changes over the last 100 days should be testimony that we are changing and attracting best talent in the industry. The people who have joined us in our top management are all from competition. R2.0 is also employeecentric and proof we are changing with regard to our employees . The reward system we have put in place shows we are not only seeing a reformed RCOM, but also the new look and face to a transformed RCOM. What are the customer targets as part of R2.0? Next 100 million customers in 1,000 days. This can be met at current growth rates. It is therefore about incremental market share and this is a huge strategic shift. We are comfortable with current growth rates and we will retain it. We are not walking away from customer share, but focus will be on the quality of customers and what we need to do to increase usage. How do you increase the quality of customers? CDMA, your core base, suffers from a perception problem. On CDMA, we are upgrading handsets to give better choices to our customers. On GSM, we are increasing the quality of customers by focusing on revenue earning customers. For example, our focus will not be limited to acquiring a customer, but also giving him recharge options. Then you get much better quality customers from day one. Other telcos, whose tariffs are not as low or competitive , are doing equally well, or even better. Does the customer really understand a few paise lower here and there? On the acquisition side, all operators are adding the same level of customers. All top players are adding between 2.6 to 3 million and entry level tariffs are common for the industry. What is different is the base as some operators may have a higher level of postpaid customers, translating into higher revenues. Does this put new entrants such as you at a disadvantage because the older operators have a huge base and they need not offer competitive tariffs to their existing customers as these subscribers cannot shift out? Our calculations show that Bharti has 30% revenue market share, while RCOM has 12% — so, in terms of customer market share, you are second, but in terms of revenues, you are at the level of Idea Cellular. We see this as an opportunity. Our CDMA customers are the core base and we are challengers in GSM. But the difference is that your core base may not give you revenues as compared to Bharti’s core base... RCOM also has a core base of data customers — data card users. We are market leaders here by a huge margin, this is a high-speed , 3G enabled service and brings in 6-7 times the ARPU of mobile customers . So, I am driving data, am aggressive in GSM and have core CDMA base which is very stable. Both GSM and our data offerings are expanding rapidly. Our high-speed data services will soon be data available in 100 towns while our 1x data services are offered in 10,000 towns. The data speeds in CDMA are far superior — combine this with the transformation, the new vision, the new people that are joining us and the new leadership team in place. Also, for the first time, the peak capex is behind us — our capex for the this financial year is Rs 3,000 crore, but we were spending about Rs 10,000 crore each over the last two years. We are now cash positive and at a position to drive growth. In there years time, our target is to achieve 20% revenue market share. We are at the takeoff point. But if the top 3-4 players are adding same number of customers, if acquisition tariffs are same for all players, then where is the differentiator that will help increase revenue market share? The stickiness of CDMA is far greater because of the handset and churn is much less. Unlike competitors, RCOM has a portfolio that has three wings — CDMA, data services and GSM — presenting us the platform to increase revenue market share. Again, one of your wings — data — will soon be with GSM competitors too as the 3G auctions are just round the corner. But we will also bid aggressively for 3G. These services will take time to roll out. It will first come to the top 100 cities. RCOM will compete in the first 100 cities on 3G, but difference is that by then we will have our data card services in 500 cities and CDMA-based 1x data services in about 20,000 towns. Does the survival of some of the operators depend on 3G? If 3G and number portability happens, high-end customers of operators who don’t offer these services may walk away. Telcos with 3G can ride the spectrum crunch by shifting customers to 3G networks. Yes, that may be the case with some operators . For us, 3G is a technology road map. Being new to GSM, we have enough headroom to acquire new customers here outside 3G. Same with our CDMA operations. Unlike, some players , RCOM doesn’t need 3G to shift some existing customers to that platform to relive 2G spectrum crunch. We have a road map for data though CDMA. Globally, 25-30 % of revenues come from data, but in India it is only about 10%. So there is ample scope for growth. Is the debt on your balance sheet a concern ? Even with Bharti’s $9 billion loan to buy Zain’s African operations, its debt will still be only as much, or a little more than what you are carrying currently. Look at it from the historical perspective. In the last two years alone, our capex was at Rs 20,000 crore. Now, that is behind us. We have a free cash flow and this year will be repaying some of our debt. Our EBIDTAs is more than adequate to take of debt. RCOM’s fixed costs are already taken care and going forward, the company’s balance sheet will improve. We are at that point of time when the peak is behind us. What do you see as the future for telecom in India? Can tariffs fall further? What about consolidation? What is the way forward for the sector? The peak tariff erosion has already happened. If you see recent launches, they have been rational on the tariff front. Everybody has realised that we cannot sell at below cost for ever. But there will be the normal erosion based on customers coming in, tariffs vouchers, etc. My personal opinion is that, there will not be a huge erosion on tariffs in the future. We clearly see termination charges as another opportunity to reduce tariffs further — this can go down to 10 paise/minute and ultimately zero. There is some value in lowering termination rates, especially because, operators are not in a position to lower tariffs further. In an indirect way, consolidation is already happening. All new players are not going in for pan-India rollouts — they have become very cautious and are opting for select rollouts. This is the first step in consolidation . The special audit report which alleged that RCOM had under-reported revenues had a big impact in the company and even its stock prices. The audit report of other operators did not have a similar impact. Do you think the new CAG audit will set the record straight? We feel vindicated after audit reports of the other telecom companies have come out. Whatever, the audit report have picked up for all operators is an industry issue. We have been maintaining that for months now. There is nothing in out accounts that is different from other operators. We were the first, whose report came out, and the impact, it had was unfortunate