Reliance Infocomm and Alcatel-Lucent establish an
innovative joint venture leading to one of the
World’s largest multivendor managed services
agreements
Yuben Joseph & Nesrin K A
School Of Management Studies
CUSAT, Kochi-22
E-mail: yubenjoseph@[Link]
Abstract: Reliance Communications turned to Alcatel-Lucent for 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 business development in India and globally are a few of the
compelling benefits being released by the telecom giant.
Keywords: Ambani, Reliance, Mobile, Alcatel.
INTRODUCTION
Reliance Communications has a reliable, high-capacity, integrated (both wireless and
wire line) and convergent (voice, data and video) digital network. It is capable of
delivering a range of services spanning the entire infocomm (information and
communication) value chain, including infrastructure and services — for enterprises as
well as individuals, applications, and consulting.
Reliance Communications is the flagship company of the Reliance Anil Dhirubhai
Ambani Group (ADAG). Rated among “Asia’s Top 5 Most Valuable Telecom
Companies”,
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reliance Communications is India's foremost and truly integrated telecommunications
service provider. The company has a customer base of over 55 million including over 1.5
million Individual overseas retail customers and ranks among the Top 10 Asian Telecom
companies by number of [Link] Communications turned to Alcatel- Lucent
for 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 business
development in India and globally are a few of the compelling benefits being released by
the telecom giant.
The Challenge
Reliance Communications is driven by a bold vision: to continuously redefine the
benchmarks of customer experience and enhance its leadership position in India’s
telecommunication space. More than anything, Reliance wanted to improve the lives of
millions in India by bringing next generation 21st century telecommunications services to
every corner of the country. In just over a decade, the company has made impressive
progress. In 1997, India was a cellular backwater with patchy service. As India
modernized, all consumers, even in rural communities, wanted cell phones with basic
services. To meet demand and begin a telecommunication transformation, Reliance
invested heavily in Code Division Multiple Access (CDMA)-based 1x technologies.
CDMA enabled it to cost effectively deliver profitable voice and data services to a mass
rural population, many with very limited purchasing abilities. By offering highly
competitive basic and advanced value added services, Reliance was able to profitably
add 1 million new subscribers a month. In 2007 Reliance added an all IP next-generation
CDMA and GSM network, powered by Alcatel-Lucent technology, to further expand its
wireless network with additional mobile switching centers and base stations. The GSM
network now includes 2G, 2.5G (GPRS), and 3G. The price for this success was
increased complexity. Over a decade the Reliance network evolved into a vast, national
multi-technology and multivendor network. Managing this complexity was a recipe for
escalating issues including unpredictable operational costs, variable performance across
the network, and ultimately declining profits. In effect, the network was beginning to drive
the business, rather than the business driving the network.
SIMPLIFICATION AND FOCUS
The key management challenge was to refocus company resources on strategies that
would increase customer satisfaction, generate new services and new revenue
opportunities — while shedding the time and resource consuming day-to-day network
operational 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 we
wanted to be increasing our operational efficiency as well by bringing in world-class
processes.” 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 Reliance
Communications
• Complete takeover of day-to-day operations, management and maintenance for
nationwide, 50+ million subscriber multivendor and multi-technology CDMA and new
Pan-India
GSM network
• Exhaustive methodology driving the phased transfer of over 1,400 employees from
Reliance Communications to Alcatel-Lucent followed by the additional hiring of over 400
new 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
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• Vastly simplified organization that is freed from tactical and technology networking
issues
• 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 (SLA’s) with the ability to deliver Key
Performance Indicators (KPI) using state-of-the art tools to track results, and build
unprecedented accountability.
• Cost optimized platform for the delivery of managed telecom services into network
operations
The Solution
Alcatel-Lucent proposed a joint venture as a way to maximize business development
opportunities and benefits for both Reliance and Alcatel-Lucent. To explore newmarkets
outside of India, Reliance needed a low cost high value delivery base. A joint venture
became a strategic vehicle for blending the strengths of both companies while giving
Reliance access to Alcatel-Lucent’s global infrastructure and processes. This includes
Network Operating Centers, KPIs, and professional change management resources,
transformational processes and tools that can be leveraged for current and future
business. The joint venture is a world’s first and creates a cost effective delivery platform
and vehicle to deliver managed telecom services for fixed, mobile and data networks
globally. Biswas comments on the groundbreaking strategic partnership:
“World over, the biggest challenge Telecom operators are facing is to continuously
improve competitiveness by reducing operating expenditure and enhancing network
quality to provide superior customer experience.” He adds, “The combined expertise and
experience of Reliance and Alcatel-Lucent would create an unmatched blend of
leadership in technology, innovation, scale of operations and customer service to
become the world’s 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 managed
services contract involving the full management of Reliance’s CDMA and GSM
Networks. The original outsourcing agreement called for a controlled two phase
transition of Network operations in 12 telecom circles by January 1, 2008. The first phase
began July 1, 2008 and resulted in the transfer of 400 employees and five telecom
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circles in less than two months. The Alcatel-Lucent transitioning planning and transfer
was so smooth that Reliance decided to accelerate and expand the contract from 12 to
23 telecom circles. This strategic decision resulted in the transfer of an additional 1,000
employees and over 55 million subscribers — making it one of the World’s 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 on the human side of this massive
transfer: “They [former Reliance employees] are the technology guys now — with the
technology leaders. There’s higher employee satisfaction and lower attrition,” he
confirms.
Why Alcatel-Lucent?
Alcatel Lucent is no stranger to Reliance Communications. Over the past decade it has
been a major supplier and provided a large portfolio of wireless solutions. This has
resulted in a close working relationship and the establishment of qualitative attributes
that are difficult to measure: mutual trust, respect and confidence. “We bought and have
been extremely comfortable with the [Alcatel-Lucent] technology. Comfortable with the
reliability of the product(s), and moreover, comfortable with the long-term relationship
and the quality of the relationship— and with the team that has been working here,” says
Biswas. Any service provider that is contemplating the outsourcing of its network faces
significant process and migration challenges if not outright risks. Success hinges on a
vendor that brings proven end-to-end processes for transitioning, managing, and
delivering KPIs and SLAs against preestablished objectives. Alcatel-Lucent is one of the
few managed service providers in the world with a true global footprint, and proven
business transformation processes that can measurably reduce operational expenditures
while increasing cost competitiveness.
KEY BENEFITS REALIZED BY RELIANCE
Alcatel-Lucent has enabled Reliance to manage its combined wireless CDMA and GSM
networks more efficiently. Management time and company resources are not absorbed
by day-to-day technological and operational issues. Operating costs are now predictable
for the next five years, enabling Reliance to plan more easily. OPEX savings in the range
of 15% to 20% are expected because of fewer network personnel to manage and
reduced facility needs. Capital expenditure savings are expected through improved
utilization of the network. With the Alcatel-Lucent managed services solution, Reliance
now has a cost optimized business model that enables it to maintain the highest
standards of customer experience. With the unique combination of network solutions
along with consulting and IT experience, Alcatel-Lucent has also enabled Reliance to:
• Achieve higher levels of customer satisfaction — from improved call set-up and
reduced cell drops — leading to greater revenue and a superior bottom line.
• Free-up senior management and company resources to focus on aggressive expansion
plans and customer acquisition, both within and outside India.
• Introduce new process-driven systems to proactively respond to changing market
conditions faster.
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• Cost effectively and efficiently manage a complex multivendor network.
TAKEOVER OF PAN- INDIA GSM NETWORK
Initially the Reliance GSM network extended to 7 telecom services. In 2007 the company
was granted licenses to expand the network to the remaining 16 telecom circles to create
a Pan-India GSM network. Alcatel-Lucent assumed complete responsibility for the
management and operations of this new GSM network from day one. This has freed
Reliance to focus exclusively on developing the business potential of this Greenfield
GSM 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 and experience makes it one of the few global vendors that can
confidently and credibly commit to a firm price while also supporting Reliance’s
international expansion. Moreover, the outsourcing agreement has equipped Reliance
for
the first time with a leading edge SLA and KPI management process. This has enabled it
to measurably improve the quality of experience to customers.
Summary
Reliance has realized huge forward momentum from the establishment of the joint
venture and in particular the decision to outsource the management of its vast
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multivendor networks to Alcatel-Lucent. Specific benefits from the managed services
contract include predictable costs, improved cost competitiveness, and the ability
for management to focus its resources on strategic priorities and its core competencies.
In addition, 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-India network. More than anything the joint venture speaks volumes for how Alcatel-
Lucent is willing to work creatively with major telecom providers to forge
strategic win-win relationships that leverage each company’s strengths and capabilities.
In today’s dynamic and unpredictable market, partnerships with this kind of
stock will be invaluable for 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 achieving strategic business goals. Although
the joint venture with Reliance is in its early days, it has already created a unique
cornerstone in the telecom industry, and a cost effective delivery platform for
delivering managed services globally.
2.0 HISTORY
In November 2004, Mukesh Ambani in an interview, admitted to having differences with
his brother Anil over 'ownership issues.' He also said that the differences "are in the
private domain." He was of the opinion that this will not have any bearing on the
functioning of the company saying Reliance is one of the strongest professionally-
managed companies. Considering the importance of Reliance Industries to the Indian
economy, this issue got an extensive coverage in the media.
Kundapur Vaman Kamath, the Managing Director of ICICI Bank was seen in media, a
close friend of the Ambani family who helped to settle the issue. The brothers had
entrusted their mother, Kokilaben Ambani, to resolve the issue. On June 18, 2005,
Kokilaben Ambani announced the settlement through a press release.
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The Reliance Empire was split between the Ambani brothers, Mukesh Ambani getting
RIL and IPCL & his younger sibling Anil Ambani heading Reliance Capital, Reliance
Energy and Reliance Infocomm. The entity headed by Mukesh Ambani is referred to as
the Reliance Industries Limited whereas Anil's Group has been renamed Anil Dhirubhai
Ambani Group (ADAG)
3.0 ABOUT COMPANY
Reliance Communications (formerly Reliance Infocomm), along with Reliance Telecom
and Flag Telecom, is part of Reliance Communications Ventures (RCoVL). It is an
Indian telecommunications company. According to National Stock Exchange data, Anil
Dhirubhai Ambani controls 66.77 per cent of the company, which accounts for more
than 1.36 billion shares.[3] It is the flagship company of the Reliance-Anil Dhirubhai
Ambani Group, comprising of power (Reliance Energy), financial services (Reliance
Capital) and telecom initiatives of the Reliance ADAG. It uses CDMA2000 1x
technology 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 the
fastest growing markets in the world.
Type Public (BSE: RCOM)
Founded 2004
Headquarters Navi Mumbai, Maharashtra, India
Anil Ambani
(Chairman) & (MD) [1]
Key people Vice-Chairman Reliance-ADA Group
S. P. Shukla
(CEO)
Industry Telecommunications
Wireless
Telephone
Products
Internet
Television
Revenue US$ 4.26 billion (2008)
Net income US$ 1.35 billion (2008)
Total assets US$ 19.31 billion (2008)
Employees 33,000
Website [Link]
Reliance Globalcom, formerly known as Flag Telecom, is a division of Reliance
Communications, manages the Global Telecom operations of India’s largest Integrated
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Telecom Service Provider. The company serves a customer base of over 1200
enterprises, 200 carriers and 1.5 million retail customers in 50 countries across 5
continents.
The company operates 'Reliance FLAG' which is the world’s largest private undersea
cable 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 business
destinations in India, the Middle East, Asia, Europe, and the U.S. Reliance
Globalcom’s Enterprise Division (formerly Yipes Inc.) provides managed Ethernet and
application delivery services for the global enterprise. Reliance Globalcom also
recently acquired Global Wimax operator called Ewaves and a leading Virtual network
operator - Vanco Group. Reliance Globalcom is headed by its President, Mr. Punit
Garg.
Reliance Industries Limited (NSE: RELIANCE) is India's largest private sector
conglomerate (by market value) and second largest in the world, with an annual
turnover of US$ 35.9 billion and profit of US$ 4.85 billion for the fiscal year ending in
March 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 industrialist
Dhirubhai Ambani in 1966. Ambani has been a pioneer in introducing financial
instruments like fully convertible debentures to the Indian stock markets. Ambani was
one of the first entrepreneurs to draw retail investors to the stock markets. Critics
allege that the rise of Reliance Industries to the top slot in terms of market
capitalization is largely due to Dhirubhai's ability to manipulate the levers of a
controlled economy to his advantage. Though the company's oil-related operations
form 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 the
lowest in the world with only 30 million phones in a population of over a billion people.
The Government’s 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 a
reflection of poor quality services, and high costs to consumers. It is estimated that
Indian 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 in
India with a national footprint, and presence in fixed line, mobile, national long
distance, and international long distance telephony, as well as a range of data and
value added services.
Reliance is building a world class broadband, IP backbone, connecting India’s top 115
cities with 60,000 route kilometers of fibre and with terabit capacity. This will serve as a
backbone for Reliance’s own services, and a carrier’s carrier. This integrated business
model will provide a sustainable competitive advantage, enhance Reliance’s returns
and minimise risks.
Reliance Infocom is to be the holding company for all infocom and related businesses
of Reliance group. An investment of Rs. 25,000 crores (US$ 5 billion) is envisaged in
infocom over the next 5 years. The project is proposed to be financed with 2:1 debt
equity. RIL is the lead investor with 45% equity stake in Reliance Infocom. Reliance is
the first company to receive licences for providing fixed line services in 16 circles,
9
which gives it a national footprint excluding just Tamilnadu and Jammu & Kashmir. The
licenses for fixed line licences also enable tapping of the mobile segment through low
cost 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 by
end 2002. Reliance is also participating in the process for disinvestment of VSNL,
which is India’s monopoly international long distance carrier.
Reliance Infocom’s comprehensive business model targets opportunities in high
growth voice and data markets. Reliance’s phased approach towards infocom
investments is directed towards achievement of strong cash flows, attractive IRRs, and
a low payback period.
4.0 LATEST DEVELOPMENT
Dec. 30 2008, The Anil Ambani-led Reliance Communications on Tuesday announced
the launch of its nationwide enhanced GSM service.
It will cover 11,000 towns across the country in the initial stage and will span across
the nation within a few months. “Starting tomorrow, our GSM service will be available
in 11,000 towns in India. We will be doubling it in next few months to over 24,000
towns and six lakh villages. Our GSM service will cover all railway routes and national
and state highways,” said Mr Anil Ambani, Chairman, Reliance Communications.
Reliance Communication has spent Rs 10,000 crore for the rollout of the nationwide
network of the GSM service. Mr Ambani said the company would spend a few
thousand crore more as the incremental investment into the venture. He said that the
company’s GSM rollout project is six months ahead of its schedule. “Reliance
completes in 15 months what other operators have taken 15 years to complete,” he
said.
Wider range
With the launch of its enhanced GSM service, Reliance’s customers will be able to use
the widest range of 300 handsets and devices, according to Mr Ambani. “Through our
global partnership on both CDMA and GSM services, our customers will now able to
roam on more networks globally in more than 200 countries,” he said.
R-Com, which already possesses the nation’s largest CDMA network, will now have a
nationwide GSM network also. Mr Ambani hinted at aggressive marketing initiatives on
the back of two strong networks. “Through our nationwide GSM launch coupled with
our continued focus on CDMA network, we will endeavour to rewrite the rules of the
industry,” he said. He made it clear that the two technology platforms will be under an
integrated brand.
Mr Ambani did not give details about the call rates and price range of the handsets.
“This will be announced in next few days,” he said.
The company also plans to launch its GSM services in Sri Lanka and Uganda, where it
has recently obtained licences to operate mobile services.
On the 19th December 2008, one of the flag telecom cables in the Mediterranean Sea
was damaged. Flag Telecom is now part of Reliance Globalcom.
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On the 30th December 2008, Reliance became the first telecom company in India to
operate in both CDMA as well as GSM technologies.
Orders for handsets
The company sources said that RCom is placing orders with LG, Samsung and
Motorola for GSM technology handsets. The entire order is estimated to be worth $
770 million. “The company is expected to order approximately 7 million handsets from
these handset manufacturers. The average cost of each handset will be around Rs
4,000 per piece,” said sources.
On the company’s plans to enter the 3G space, Mr Ambani said the company was
looking forward to participating in the 3G bandwidth auction. It plans an investment of
between Rs 2,000 to Rs 4,000 crore for its foray into 3G services.
In response to a question, he said there would be some announcements in the next
few months regarding sharing of telecom infrastructure with other service providers.
The company was also open to raising capital for its telecom infrastructure arm,
Reliance Infratel, in 2009.
5.0 ABOUT OWNER
Anil Ambani (born June 4, 1959) is an Indian billionaire and a major shareholder in
Reliance Anil Dhirubhai Ambani Group. Anil's elder brother, Mukesh Ambani, is also a
billionaire, and owns another company called Reliance Industries.
He is a member of the Board of Overseers at the Wharton School of the University of
Pennsylvania. He is also the a member of the Board of Governors of the Indian
Institute of Technology, Kanpur; Indian Institute of Management, Ahmedabad. He is a
member of the Central Advisory Committee, Central Electricity Regulatory
Commission. In March 2006, he resigned. He is also the Chairman of Board of
Governors of DA-IICT, Gandhinagar.
In 2007 his name was added to the list of Indian Trillionaires (in terms of Indian
Rupee).
Career:
Ambani joined Reliance; the company founded by his late father Dhirubhai Ambani, in
1983 as Co-Chief Executive Officer and is credited with having pioneered many
financial innovations in the Indian capital markets. For example, he led India's first
forays into overseas capital markets with international public offerings of global
depositary receipts, convertibles and bonds. He directed Reliance in its efforts to raise,
since 1991, around US$2 billion from overseas financial markets; with a 100-year
Yankee bond issue in January 1997 being the high point, after which people regarded
him as a financial wizard. He along with his brother, Mukesh Ambani, has steered the
Reliance Group to its current status as India's leading textiles, petroleum,
petrochemicals, power, and telecom company.
He has been linked with several starlets in his long career including his current wife of
more than 15 years. He is a close friend of movie star Amitabh Bachchan and Subrata
[Link] of his major achievements in the entertainment industry is the takeover of
Adlabs, the movie production to distribution to multiplex company that owns India's
only dome theatre and the recently announced joint venture worth US$ 825 million with
Steven Spielberg
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6.0 ACQUISITIONS
In July 2007, the company announced it is buying US-based managed ethernet and
application delivery services company Yipes Enterprise Services for a cash amount of
Rs. 1200 crore rupees (equivalent of USD 300 million). The deal was announc
overseas acquisition, the Reliance group has amalgamated the United States-based
Flag Telecom for $ 211 million [roughly Rs 950 crore (Rs 9.50 billion)].
7.0 CONCLUSION
A dream comes true
The Late Dhirubhai Ambani dreamt of a digital India — an India where the common
man would have access to affordable means of information and communication.
Dhirubhai, who single-handedly built India’s largest private sector company virtually
from scratch, had stated as early as 1999: “Make the tools of information and
communication available to people at an affordable cost. They will overcome the
handicaps of illiteracy and lack of mobility.”
It was with this belief in mind that Reliance Communications (formerly Reliance
Infocomm) started laying 60,000 route kilometres of a pan-India fibre optic backbone.
This backbone was commissioned on 28 December 2002, the auspicious occasion of
Dhirubhai’s 70th birthday, though sadly after his unexpected demise on 6 July 2002.
Reliance Communications has a reliable, high-capacity, integrated (both wireless and
wireline) and convergent (voice, data and video) digital network. It is capable of
delivering a range of services spanning the entire infocomm (information and
communication) value chain, including infrastructure and services — for enterprises as
well as individuals, applications, and consulting.
Today, Reliance Communications is revolutionising the way India communicates and
networks, truly bringing about a new way of life.
8.0 REFERENCE
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6. Major Subsidiaries & Associates :: Reliance Industries Limited
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