What Went Wrong?

[chandramauli 0]

I read this article on the net (businessworld site)...its interesting ... thought i should share it with you all ...

WHAT WENT WRONG?

Since its high-profile launch on 28 December, the Reliance Infocomm project has been plagued by unpr

T. SURENDAR 1 2

In the first-class compartment of a Mumbai suburban train, a middle-aged Gujarati businessman screams into his Reliance phone: "I don't want free services. Charge me anything you like, but let me send messages."

At the Reliance customer service centre in Lower Parel, nerves are frayed and tempers run short. Hordes of disgruntled customers land up from morning to evening to decry the Reliance service. Some can barely be stopped from getting into fisticuffs with customer services executives.

Hundreds of Reliance Infocomm dealers, a.k.a. Dhirubhai Ambani Entrepreneurs (DAE), around the country want out and and are demanding their deposits. They say that the business is a lot less attractive than Reliance had led them to believe.

In an interview to a business daily, Reliance Industries chairman Mukesh Ambani candidly admits that the DAE scheme has been less than successful. He says that the company is planning to cut the number of DAEs by half.

THE first six months of the Reliance Infocomm rollout is something that Mukesh Ambani would dearly like to forget. When Ambani launched the Infocomm services with great hype and hoopla on 28 December 2002, the plan was simple - but audacious. The Reliance Infocomm services would be rolled out across the country within two months. It would offer tariffs that cellular rivals would never be able to match. It would get existing cellular customers to defect by offering always-on broadband Internet on their handsets - a facility most cellular operators would not be able to provide for some more time. And finally, though Reliance had the licence to offer only limited mobility it would offer customers full roaming anywhere in the country. (It planned to do so by forwarding calls via contiguous circles. Since it had taken the licences for practically every telecom circle in the country, in practical terms it could offer full mobility.)

By offering this unparalleled basket of goodies, Reliance expected to sweep the mobile telephony market. In an exclusive interview to BW just before the launch, Ambani said that he was confident of enlisting 3 million subscribers by 28 February. (Reliance executives had told BW that the internal target was much higher at 10 million subscribers by 31 March). Ambani also said Reliance Infocomm expected to break even by the end of Year I. (Though they have been operating for nine years, only a couple of cellular operators have actually broken even so far.)

Instead, in the first four months, Reliance has seen one thing after another go wrong with the Infocomm rollout. First, it failed to tie up interconnect agreements with other players as quickly as it had hoped to. As a result, the commercial rollout across the country had to be postponed twice - and even now, the Reliance service is fully operational only in 110 of the 673 circles it planned to cover. Second, the lack of interconnect agreements saw early adopters of the Reliance phone unable to connect or send SMS to anyone other than Reliance subscribers. And the Internet content that Reliance subscribers could access also proved fairly limited.

Meanwhile, the cellular operators fought back with a ferocity Reliance had not expected. Led by Bharti and Hutchison, the cellular operators forced the telecom regulator to reexamine interconnect charges, slashed tariffs and launched an aggressive communication campaign pointing out the hidden traps in the Reliance pricing.

As a result, four months into the Infocomm rollout, Reliance officials admit that they have not been able to meet the subscriber targets. Today, Reliance officially puts the number of subscribers it has managed to sign up at 1 million, or a third of what Mukesh Ambani had said he expected by 28 February. Sources in the Infocomm project though admitted privately to BW that the number of subscribers was actually closer to 600,000. What's more, Amit Bose (ex-Hindustan Lever and ex-Pepsi), who had been brought in as chief of marketing, has quit the company as has his deputy Shailendra Gupte (ex-Lever). Barcelona-based telecom consultants DiamondCluster International, which spent months researching the pricing and rollout plan, has left even as Reliance is revising its tariffs.

So what went wrong with Reliance Infocomm? First, a small note: despite all the hiccups so far, the Reliance Infocomm project cannot be said to be facing a crisis. The current problems cannot even be considered a major setback for the group or the project. They are far more in the nature of teething troubles. As you will read in the story, the Ambanis are already moving swiftly to take corrective action - in pricing, in marketing, in interconnect agreements, in customer care. Their ambitions of dominating telecom remain intact. And their telecom rivals know that the Ambani threat is far from over.

And yet, the kind of troubles that Reliance has got into with its Infocomm project is significant for one reason. Over the last few years, Reliance had built up an image of a company that could manage any project of any complexity without a single mis-step. The Ambanis had built up an aura of invincibility. And that is an aura that has got shattered. As an Airtel executive puts it: "Reliance has never faced failure publicly." In fact, the Infocomm project's troubles are expected to have maximum impact on the group's image, not its financials or long-term strategy.

Back to the original question: why did the Infocomm rollout go wrong? While the Ambanis refused to co-operate for this story, dozens of interviews with former as well as serving members of the Infocomm project, and vendors and other partners of Reliance provides a fascinating picture of a project that was plagued by miscalculations on all fronts, where Ambani family confidantes and professional managers often worked at cross-purposes, and where the key decision-makers chose to go ahead with the rollout even when it was clear that all the pieces of the service were not in place. It was not any one big mistake - rather the rollout chaos was the culmination of a series of small mis-steps.

The Initial Planning Mix-ups

In retrospect, Reliance's telecom project had experienced a series of hiccups in strategy formulation right from inception. Ambitious strategies were drawn up and then junked, at least twice before the current Infocomm strategy was finalised. The first strategy, drawn up by high-profile telecom industry veterans B.K. Syngal (former chairman of Bharat Sanchar Nigam) and Ashwini Windlass (former vice-chairman of Max Telecom) was junked because it apparently did not find favour with Mukesh Ambani's close aides. Then, there was another strategy in 1999 that envisaged a partnership with WorldTel and a big bet on data traffic. That, too, was unceremoniously dumped when Reliance decided the cash flows would not be attractive.

The final Infocomm strategy was more or less finalised in mid-2000 by Mukesh Ambani and Manoj Modi. The vision was a service based on the new-generation CDMA technology that would offer cellular services, but would be backed by high-speed optic fibre networks underground. The idea: offer cellular service at the cost of a basic service.

The problem was that even when the strategy was finalised, neither Ambani nor Modi spent much time thinking about the marketing end. In April-May 2002, barely six months before the original launch date of September 2002, Reliance decided to start fixing the marketing and distribution problem. Since it didn't have much experience with retailing in the consumer sector - and since Reliance loved controlling every part of the chain in any sector it got into - the team decided to set up proprietary Web stores across the country. Hital Meswani, a cousin of the Ambanis and an executive director in Reliance Industries, was entrusted with creating a network of 250-300 stores by the launch date.

Till August, the company had managed to set up only one sample store in Vile Parle in Mumbai. Meanwhile, the Ambanis fell back on Mudra, the group's advertising agency, to work out issues like the brand logo, the store designs, and other aspects of the communication strategy. In July, Mudra made actor Aamir Khan the brand ambassador. The services were branded Ginie - Ginie phones, Ginie accessories and Ginie recharge cards.

In May, Reliance decided to pick up Amit Bose to head the Reliance Infocomm marketing efforts. Shailendra Gupte joined Bose in September. Bose and Gupte were professional FMCG marketers and their ideas on marketing strategy were very different from what Mudra had worked out. They commissioned Indica Research to do a detailed study to understand the demand potential and concept acceptance for the WLL services.

The duo reviewed every bit of the old marketing plan - and junked 90% of it. The brandname Ginie was dropped. The Amir Khan as brand ambassador idea was dropped as well. Finally, Bose decided to downplay the company-owned web store as the primary channel for selling the service. They decided to focus more on the dealer route instead. Meanwhile, consultants DiamondCluster, which worked on the infrastructure rollout, worked with Bose to prepare a marketing rollout plan.

In mid-September, advertising agencies and media buying agencies were invited to pitch for the Reliance business. The new launch date was now set for 28 December, Reliance group founder Dhirubhai Ambani's birthday.

Bose and his team envisaged launching the Reliance Infocomm service like any FMCG product. They wanted the product to be available with 10,000-odd dealers on the day of the launch. They planned to carry out a high-pitched advertising campaign to attract customers. The marketing staff was expected to track the sales like they would for a soap or a shampoo and create point-of-presence (POP) aids according to local needs. Bose had begun the process of shortlisting the 10,000 retailers. By early November, all the 10,000 outlets that would hawk Reliance phones were identified. The plans were grandiose. These 10,000 shops were mapped on a geographical information system (GIS) software. Many of them would be wired with fibre and surveillance cameras and could be monitored at the Reliance control room in the Dhirubhai Ambani Knowledge Centre (DAKC) in Navi Mumbai.

But one crucial piece of the puzzle was missing. The marketing team had no idea about the pricing of the services. Though a lot of people were encouraged to draw up pricing models, not even Bose knew how the services were going to be priced. That left the team short of a critical component to present a "final" communication package to the company. Says a marketing executive: "It was a frustrating experience. As the launch drew near, it was clear that even senior employees were powerless puppets." However, as DiamondCluster was working out a pricing plan, Bose and his team were confident that nothing much would go wrong.

contd : on Page 2

other extracts from page 2 :

How It Unravelled

Almost immediately after the 28 December launch, the hitches began to show up. The DAE scheme was the first to show signs of strain. Just weeks after the DAE scheme hit the road, dealers from Pune were up in arms and wanted their deposits back. The Reliance scheme did not appear as attractive as it was made out to be. The dealers had believed that they would get Rs 400 for every connection they sold. Later, they realised that dealers who enrolled 100 or more subscribers were eligible to get only Rs 400. Those who got 10 or fewer subscriptions would get nothing. This was again because Ambani's core team wanted to recover the capital spent as quickly as possible. The dealers also found that though they had been encouraged to allow new subscribers to try out the service by making free calls before they enrolled, when dealers wanted to resign, they were told to pay for all the free calls made on the phone. Most dealers ended up losing money. Says a dealer in Dadar: "I started advising my customers not to subscribe to the service. I warned them not to repeat my mistake."

Meanwhile, competitors hit back far harder than Reliance had expected. The GSM players united to push the Telecom Regulatory Authority of India (Trai) to review and remove the interconnect charge differences between cellular and basic players. They also lobbied heavily for the removal of telecommunication minister Pramod Mahajan, who they perceived to be close to the Ambanis. And the new interconnect regime allowed them to drop their own prices and bring it to a level quite close to what was being offered by Reliance. At one stroke, they almost neutralised the price advantage of the Ambanis.[

Meanwhile, the cellular players (and even Bharat Sanchar Nigam) started going slow in inking interconnect agreements with Reliance Infocomm in the different circles. Net result: Reliance had to postpone its commercial rollout twice. And even after it started rolling out the service, it could only cover 60 cities against a target of 120 cities. Says an Airtel executive: "They underestimated their opponents totally. They won't be able to offer roaming services in a hurry."

[kshah 452]

nice article

[chandramauli 0]

Corrective Action

Mukesh Ambani and his team have moved fast to rectify most things that went wrong. Many of the interconnect agreements were signed by April and the service was rolled out rapidly in new cities. Having resolved that, Infocomm services are now improving quickly. For the first time in four months, customers can send text messages to cellular services of BPL Mobile and Airtel. The company has also made its subscription plans easier. Customers can get the service by paying just Rs 3,350 without having to issue post-dated cheques for three years. Phones will be available off the shelf at the Web stores and phone stores across cities and towns. Says Reliance Entertainment chairman Amit Khanna: "All this has happened almost overnight without any break in services. That should explain our capabilities."

Elsewhere, too, the Reliance juggernaut is rolling on as if nothing has happened. The Chennai-based Midas Networks is wiring up 1,545 towns with CorDect exchanges to provide fixed line connections. In three months, over 1.5 million lines will be available in these far-flung areas to enlarge the Reliance network. In Mumbai, the company is using new technology to lay fibre on road without digging to bring fibre to offices and apartments quickly. Mukesh Ambani is also trying hard to show that Reliance empowers professionals. For the first time in Reliance Infocomm, a professional manager, Prakash Bajpai, was allowed to make a presentation on the progress of the business.

The Reliance cellular business in the seven eastern states started with similar doubts about viability. There were lots of complaints about the service. Today, it has 500,000 clients or 50% of the market. The business has also earned a Rs 88-crore profit in 2002-03. So do not write off Infocomm just yet.

[Greens 21]

This article was published on 19 May, 2003, almost 2 years back, but still it makes some sense.

[anujit 0]

Well intereconnect (especially for sms & value added services) and poor signal quality still continue to be a major problem for RIM users.... not to mention how difficult is to get through to RIM users from BSNL landlines!

[Basant 0]

Reliance made too many promises and kept few of them.

Today hardly any RIM customer trusts Reliance. Most of them have been scrwed one time or other.

In terms of customer service, Reliance is the worst in India. Even sarkari BSNL is better.

I guess, more than any thing, it is the level of customer satisfaction and trust working against Reliance.

[kshah 452]

Though reliance has many problem, it seems they will over come withtheir might, financial might. They can run business on loss model for few years, still can show profits on books and get finance they want.

Infact reliance is dogged by typical syndrom, no empowerment to any one. That is the reason why customer satisfaction is very poor.

About interconnectivity, every operator has similar problems. It is more for reliance as people are affraid of them.

[chandramauli 0]

In terms of customer service, Reliance is the worst in India. Even sarkari BSNL is better.

hahahaha... u must be kidding ...!!!!

well RIL isnt still taking corrective measures to improve on their part... i had been to an lg service point tp get my phone s/w upgraded .... 1stly the looking after the centre wasn't theere .... the fellow ther said u will have to wait 1hrs till he comes back ... (i said ok i dont mind ..coz i needed the s/w to be up\graded badlly..)

2ndly customers come, they are shocked to get answers like reliance is bad ..its reliance's fault ... (even if its an handset issue... they never claim responisbility ... )

god knows when RIL will take carrective action on this part ...