Reliance Infocomm and Alcatel

8/6/2019 Reliance Infocomm and Alcatel

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Reliance Infocomm and Alcatel-Lucent establish aninnovative joint venture leading to one of the

Worlds largest multivendor managed servicesagreements

Yuben Joseph & Nesrin K A

School Of Management StudiesCUSAT, Kochi-22

E-mail: [email protected]

Abstract: Reliance Communications turned to Alcatel-Lucent for bold optionsto bring superior operating efficiencies to its national multivendor, multi-technology network. Alcatel-Lucent responded with an innovative joint ventureand a substantial managed network services and outsourcing solution.Predictable costs, measurable OPEX savings and the freedom to focus onaggressive business development in India and globally are a few of thecompelling benefits being released by the telecom giant.

Keywords : Ambani, Reliance, Mobile, Alcatel.

INTRODUCTION

Reliance Communications has a reliable, high-capacity, integrated (both wireless andwire line) and convergent (voice, data and video) digital network. It is capable of delivering a range of services spanning the entire infocomm (information andcommunication) value chain, including infrastructure and services for enterprises aswell as individuals, applications, and consulting.

Reliance Communications is the flagship company of the Reliance Anil DhirubhaiAmbani Group (ADAG). Rated among Asias Top 5 Most Valuable TelecomCompanies,

Reliance Communications is India's foremost and truly integrated telecommunicationsservice provider. The company has a customer base of over 55 million including over 1.5million Individual overseas retail customers and ranks among the Top 10 Asian Telecom

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companies by number of customers. Reliance Communications turned to Alcatel- Lucentfor bold options to bring superior operating efficiencies to its national multivendor, multi-technology network. Alcatel-Lucent responded with an innovative joint venture and a

substantial managed network services and outsourcing solution. Predictable costs,measurable OPEX savings and the freedom to focus on aggressive businessdevelopment in India and globally are a few of the compelling benefits being released bythe telecom giant.

The Challenge

Reliance Communications is driven by a bold vision: to continuously redefine thebenchmarks of customer experience and enhance its leadership position in Indiastelecommunication space. More than anything, Reliance wanted to improve the lives of millions in India by bringing next generation 21st century telecommunications services toevery corner of the country. In just over a decade, the company has made impressiveprogress. In 1997, India was a cellular backwater with patchy service. As Indiamodernized, all consumers, even in rural communities, wanted cell phones with basicservices. To meet demand and begin a telecommunication transformation, Relianceinvested heavily in Code Division Multiple Access (CDMA)-based 1x technologies.CDMA enabled it to cost effectively deliver profitable voice and data services to a massrural population, many with very limited purchasing abilities. By offering highlycompetitive basic and advanced value added services, Reliance was able to profitablyadd 1 million new subscribers a month. In 2007 Reliance added an all IP next-generationCDMA and GSM network, powered by Alcatel-Lucent technology, to further expand itswireless network with additional mobile switching centers and base stations. The GSMnetwork now includes 2G, 2.5G (GPRS), and 3G. The price for this success wasincreased complexity. Over a decade the Reliance network evolved into a vast, nationalmulti-technology and multivendor network. Managing this complexity was a recipe for escalating issues including unpredictable operational costs, variable performance acrossthe network, and ultimately declining profits. In effect, the network was beginning to drivethe business, rather than the business driving the network.

SIMPLIFICATION AND FOCUS

The key management challenge was to refocus company resources on strategies thatwould increase customer satisfaction, generate new services and new revenueopportunities while shedding the time and resource consuming day-to-day networkoperational issues that come with running complex multi-vendor networks. I think our biggest focus was to make our OPEX predictable, confirms Sandip Biswas, Head Managed Network, Reliance Communications. He adds, I should mention that wewanted to be increasing our operational efficiency as well by bringing in world-classprocesses. Effectively, Reliance wanted a strategic partner who could not only take over operations and maintenance (O&M) services but one that could be a catalyst for innovation and help identify new business opportunities around the globe.

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CHALLENGES

The need to expand services to new markets within and outside India

Increasing focus on tactical and technology related day-to-day network operations

Escalating management complexity resulting from a multi-technology and multivendor environment including a new Pan-India GSM network

Improving customer care and satisfaction

Network issues increasingly driving business decisions

SOLUTION

Global joint venture leading to a managed network services contract for RelianceCommunications

Complete takeover of day-to-day operations, management and maintenance for nationwide, 50+ million subscriber multivendor and multi-technology CDMA and newPan-India

GSM network

Exhaustive methodology driving the phased transfer of over 1,400 employees fromReliance Communications to Alcatel-Lucent followed by the additional hiring of over 400new employees (scaling up to 2,000 to 2,500 employees in the next 1 to 2 years)

Reliance retains network design, network evolution and engineering decisions

BENEFITS

Business driven network

Predictable operating expenses

Vastly simplified organization that is freed from tactical and technology networkingissues

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Ability to focus on market expansion and the rollout of new services

Increased agility to quickly respond to changing market conditions with next generation

services

Dramatic improvement in ability to increase customer satisfaction and shareholder value

Aggressive Service Level Agreements (SLAs) with the ability to deliver KeyPerformance Indicators (KPI) using state-of-the art tools to track results, and buildunprecedented accountability.

Cost optimized platform for the delivery of managed telecom services into networkoperations

The Solution

Alcatel-Lucent proposed a joint venture as a way to maximize business developmentopportunities and benefits for both Reliance and Alcatel-Lucent. To explore newmarketsoutside of India, Reliance needed a low cost high value delivery base. A joint venturebecame a strategic vehicle for blending the strengths of both companies while givingReliance access to Alcatel-Lucents global infrastructure and processes. This includesNetwork Operating Centers, KPIs, and professional change management resources,transformational processes and tools that can be leveraged for current and futurebusiness. The joint venture is a worlds first and creates a cost effective delivery platformand vehicle to deliver managed telecom services for fixed, mobile and data networksglobally. Biswas comments on the groundbreaking strategic partnership:

World over, the biggest challenge Telecom operators are facing is to continuouslyimprove competitiveness by reducing operating expenditure and enhancing networkquality to provide superior customer experience. He adds, The combined expertise andexperience of Reliance and Alcatel-Lucent would create an unmatched blend of leadership in technology, innovation, scale of operations and customer service tobecome the worlds leading Managed Network Services Provider. FIRST CONTRACT:AN OUTSOURCING SOLUTION.

FOR RELIANCE

The first order of business for the newly minted joint venture was a massive managedservices contract involving the full management of Reliances CDMA and GSMNetworks. The original outsourcing agreement called for a controlled two phasetransition of Network operations in 12 telecom circles by January 1, 2008. The firstphase began July 1, 2008 and resulted in the transfer of 400 employees and fivetelecom circles in less than two months. The Alcatel-Lucent transitioning planning andtransfer was so smooth that Reliance decided to accelerate and expand the contractfrom 12 to 23 telecom circles. This strategic decision resulted in the transfer of an

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additional 1,000 employees and over 55 million subscribers making it one of theWorlds largest managed services agreements. What is more, the entire transfer occurred seamlessly within the span of three months with all day-to-day network

operations being assumed by Alcatel-Lucent by October 1, 2008. Biswas comments onthe human side of this massive transfer: They [former Reliance employees] are thetechnology guys now with the technology leaders. Theres higher employeesatisfaction and lower attrition, he confirms.

Why Alcatel-Lucent?

Alcatel Lucent is no stranger to Reliance Communications. Over the past decade it hasbeen a major supplier and provided a large portfolio of wireless solutions. This hasresulted in a close working relationship and the establishment of qualitative attributesthat are difficult to measure: mutual trust, respect and confidence. We bought and havebeen extremely comfortable with the [Alcatel-Lucent] technology. Comfortable with thereliability of the product(s), and moreover, comfortable with the long-term relationshipand the quality of the relationship and with the team that has been working here, saysBiswas. Any service provider that is contemplating the outsourcing of its network facessignificant process and migration challenges if not outright risks. Success hinges on avendor that brings proven end-to-end processes for transitioning, managing, anddelivering KPIs and SLAs against preestablished objectives. Alcatel-Lucent is one of thefew managed service providers in the world with a true global footprint, and provenbusiness transformation processes that can measurably reduce operational expenditureswhile increasing cost competitiveness.

KEY BENEFITS REALIZED BY RELIANCE

Alcatel-Lucent has enabled Reliance to manage its combined wireless CDMA and GSMnetworks more efficiently. Management time and company resources are not absorbedby day-to-day technological and operational issues. Operating costs are now predictablefor the next five years, enabling Reliance to plan more easily. OPEX savings in the rangeof 15% to 20% are expected because of fewer network personnel to manage andreduced facility needs. Capital expenditure savings are expected through improvedutilization of the network. With the Alcatel-Lucent managed services solution, Reliancenow has a cost optimized business model that enables it to maintain the higheststandards of customer experience. With the unique combination of network solutionsalong with consulting and IT experience, Alcatel-Lucent has also enabled Reliance to:

Achieve higher levels of customer satisfaction from improved call set-up andreduced cell drops leading to greater revenue and a superior bottom line.

Free-up senior management and company resources to focus on aggressive expansionplans and customer acquisition, both within and outside India.

Introduce new process-driven systems to proactively respond to changing marketconditions faster.

Cost effectively and efficiently manage a complex multivendor network.

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TAKEOVER OF PAN- INDIA GSM NETWORK

Initially the Reliance GSM network extended to 7 telecom services. In 2007 the companywas granted licenses to expand the network to the remaining 16 telecom circles tocreate a Pan-India GSM network. Alcatel-Lucent assumed complete responsibility for themanagement and operations of this new GSM network from day one. This has freedReliance to focus exclusively on developing the business potential of this GreenfieldGSM opportunity.

The Added Value

In addition to Alcatel-Lucent, main vendors included Ericsson, Huawei, Motorola, ZTE,and Cisco Systems. Given this complex multivendor and multi-technology reality, vendor neutrality was a key requirement for a successful outsourced managed services

relationship. Alcatel-Lucent brings a rare global footprint and expertise in multi-customer and multi-vendor operations that are unmatched in the industry. This expertise andexperience makes it one of the few global vendors that can confidently and crediblycommit to a firm price while also supporting Reliances international expansion.Moreover, the outsourcing agreement has equipped Reliance for the first time with aleading edge SLA and KPI management process. This has enabled it to measurablyimprove the quality of experience to customers.

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ABOUT COMPANY:

In November 2004, Mukesh Ambani in an interview, admitted to having differences withhis brother Anil over 'ownership issues.' He also said that the differences "are in theprivate domain." He was of the opinion that this will not have any bearing on thefunctioning of the company saying Reliance is one of the strongest professionally-managed companies. Considering the importance of Reliance Industries to the Indianeconomy, this issue got an extensive coverage in the media.

Kundapur Vaman Kamath, the Managing Director of ICICI Bank was seen in media, aclose friend of the Ambani family who helped to settle the issue. The brothers hadentrusted their mother, Kokilaben Ambani, to resolve the issue. On June 18, 2005,Kokilaben Ambani announced the settlement through a press release.

The Reliance Empire was split between the Ambani brothers, Mukesh Ambani gettingRIL and IPCL & his younger sibling Anil Ambani heading Reliance Capital, RelianceEnergy and Reliance Infocomm. The entity headed by Mukesh Ambani is referred to asthe Reliance Industries Limited whereas Anil's Group has been renamed Anil DhirubhaiAmbani Group (ADAG)

Reliance Communications (formerly Reliance Infocomm), along with Reliance Telecomand Flag Telecom, is part of Reliance Communications Ventures (RCoVL). It is anIndian telecommunications company. According to National Stock Exchange data, AnilDhirubhai Ambani controls 66.77 per cent of the company, which accounts for morethan 1.36 billion shares.[3] It is the flagship company of the Reliance-Anil DhirubhaiAmbani Group, comprising of power (Reliance Energy), financial services (RelianceCapital) and telecom initiatives of the Reliance ADAG. It uses CDMA2000 1xtechnology for its existing CDMA mobile services, and GSM-900/GSM-1800

technology for its existing/newly launched GSM services.RelCom is also into Wireline Business throughout India and has the largest optical fiber communication (OFC) backbone architecture [roughly 110,000 km] in the country.Reliance Communications has launched its Direct To Home (DTH) TV also, known as"Big TV". RelCom have presence across all B2C communications channel in one of thefastest growing markets in the world.

Reliance Globalcom, formerly known as Flag Telecom, is a division of RelianceCommunications, manages the Global Telecom operations of Indias largest IntegratedTelecom Service Provider. The company serves a customer base of over 1200enterprises, 200 carriers and 1.5 million retail customers in 50 countries across 5continents.The company operates 'Reliance FLAG' which is the worlds largest private underseacable system spanning 65,000 km. This is seamlessly integrated with 110,000 km of domestic optic fiber of Reliance Communications connecting it to 40 key businessdestinations in India, the Middle East, Asia, Europe, and the U.S. RelianceGlobalcoms Enterprise Division (formerly Yipes Inc.) provides managed Ethernet andapplication delivery services for the global enterprise. Reliance Globalcom alsorecently acquired Global Wimax operator called Ewaves and a leading Virtual network

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operator - Vanco Group. Reliance Globalcom is headed by its President, Mr. PunitGarg.

Type Public (BSE: RCOM)Founded 2004Headquarters Navi Mumbai, Maharashtra, India

Key people

Anil Ambani(Chairman) & (MD) [1]

Vice-Chairman Reliance-ADA GroupS. P. Shukla

(CEO)Industry Telecommunications

Products

WirelessTelephone

InternetTelevision

Revenue US$ 4.26 billion (2008)

Net income US$ 1.35 billion (2008)Total assets US$ 19.31 billion (2008)Employees 33,000

Website www.rcom.co.in

Reliance Industries Limited (NSE: RELIANCE) is India's largest private sector conglomerate (by market value) and second largest in the world, with an annualturnover of US$ 35.9 billion and profit of US$ 4.85 billion for the fiscal year ending inMarch 2008 making it one of India's private sector Fortune Global 500 companies,being ranked at 206th position (2008).[1] It was founded by the Indian industrialistDhirubhai Ambani in 1966. Ambani has been a pioneer in introducing financialinstruments like fully convertible debentures to the Indian stock markets. Ambani wasone of the first entrepreneurs to draw retail investors to the stock markets. Criticsallege that the rise of Reliance Industries to the top slot in terms of marketcapitalization is largely due to Dhirubhai's ability to manipulate the levers of acontrolled economy to his advantage. Though the company's oil-related operationsform the core of its business, it has diversified its operations in recent years. After severe differences between the founder's two sons, Mukesh Ambani and Anil Ambani,the group was divided between them in 2006

The Indian infocom markets present a unique opportunity, with significant potential for sustained growth over the medium term. The current Indian teledensity is amongst thelowest in the world with only 30 million phones in a population of over a billion people.The Governments stated objective is to achieve over 150 million phones by the year 2010.The existing voice market size is only Rs. 35,000 crores (US$ 8 billion), which is areflection of poor quality services, and high costs to consumers. It is estimated thatIndian infocom revenues can grow to nearly Rs.1,00,000 crores (US$ 20 billion) over the next 5 years.Reliance has already announced plans for addressing the entire telecom market inIndia with a national footprint, and presence in fixed line, mobile, national longdistance, and international long distance telephony, as well as a range of data andvalue added services.

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Reliance is building a world class broadband, IP backbone, connecting Indias top 115cities with 60,000 route kilometers of fibre and with terabit capacity. This will serve as abackbone for Reliances own services, and a carriers carrier. This integrated business

model will provide a sustainable competitive advantage, enhance Reliances returnsand minimise risks.Reliance Infocom is to be the holding company for all infocom and related businessesof Reliance group. An investment of Rs. 25,000 crores (US$ 5 billion) is envisaged ininfocom over the next 5 years. The project is proposed to be financed with 2:1 debtequity. RIL is the lead investor with 45% equity stake in Reliance Infocom. Reliance isthe first company to receive licences for providing fixed line services in 16 circles,which gives it a national footprint excluding just Tamilnadu and Jammu & Kashmir. Thelicenses for fixed line licences also enable tapping of the mobile segment through lowcost Wireless in Local Loop (WiLL) services in addition to its existing GSM business.Reliance is also the first company to receive the National Long Distance (NLD) licence.Work on the IP backbone is on schedule, with the project on target for completion byend 2002. Reliance is also participating in the process for disinvestment of VSNL,which is Indias monopoly international long distance carrier.Reliance Infocoms comprehensive business model targets opportunities in highgrowth voice and data markets. Reliances phased approach towards infocominvestments is directed towards achievement of strong cash flows, attractive IRRs, anda low payback period.

Summary

Reliance has realized huge forward momentum from the establishment of the jointventure and in particular the decision to outsource the management of its vastmultivendor networks to Alcatel-Lucent. Specific benefits from the managed servicescontract include predictable costs, improved cost competitiveness, and the ability for management to focus its resources on strategic priorities and its core competencies. Inaddition, by taking over all responsibilities for the O&M of a Greenfield GSM network,Alcatel-Lucent has enabled Reliance to immediately concentrate on the deployment of

new revenue generating services and business development of this new Pan-Indianetwork. More than anything the joint venture speaks volumes for how Alcatel-Lucent iswilling to work creatively with major telecom providers to forge strategic win-winrelationships that leverage each companys strengths and capabilities. In todaysdynamic and unpredictable market, partnerships with this kind of stock will be invaluablefor capitalizing on global business opportunities in the future. Traditional operator-vendor relationships will have their place but for large global players like Reliance, a stickier,more comprehensive strategic alliance may well be a key success factor in achievingstrategic business goals. Although the joint venture with Reliance is in its early days, ithas already created a unique cornerstone in the telecom industry, and a cost effectivedelivery platform for delivering managed services globally.

REFERENCE

1. http://en.wikipedia.org/wiki/Reliance_Communications

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2. http://en.wikipedia.org/wiki/Reliance_Globalcom

3. http://www.thehindubusinessline.com/2008/12/31/stories/2008

123151160400.htm4. http://www.atimes.com/atimes/south_asia/DG09Df01.html

5. http://timesofindia.indiatimes.com/RIL_among_worlds_100_mo

st_respected_companies/articleshow/3453197.cms

6. Major Subsidiaries & Associates :: Reliance Industries Limited

7. http://indiatoday.intoday.in/index.php?

option=com_content&task=view&id=31590&Itemid=1&issuei

d=96&sectionid=30&page=archieve&limit=1&limitstart=1

8. http://www.relianceadagroup.com/adportal/ADA/media/busine

ssman_year.html

9. http://en.wikipedia.org/wiki/Reliance_Industries

10. http://www.mirror.co.uk/sport/football/2008/09/29/exclusive-

everton-targetted-for-take-over-by-indian-tycoon-worth-

20billion-115875-20760882/

11. http://en.wikipedia.org/wiki/Dhirubhai_Ambani

12. http://www.hindustantimes.com/news/181_1885264,0002000

9.htm

13. http://en.wikipedia.org/wiki/Anil_Ambani14. http://www.thehindubusinessline.com/2008/12/31/stories/200

8123151160400.htm

15. http://www.rcom.co.in/webapp/Communications/rcom/Aboutu

s/aboutus_home.jsp

16. http://en.wikipedia.org/wiki/Reliance_Capital

17. http://www.reliancecommunications.co.in/Communications/IR/

late_fin_result_audited.html

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Reliance Infocomm and Alcatel