RIL : A SWOT ANALYSIS

Transcription

1 CHAPTER 4 RIL : A SWOT ANALYSIS Doctoral Thesis by Sharad Singh 85

2 STRENGTH 4. RIL : A SWOT ANALYSIS 1) TECHNOLOGY FSK signaling transmits (fm) digital info across analog channel. Bits are grouped into blocks of affixed size and each block is represented by unique carrier frequency called a symbol 0 &1, low for 1(mark), high for 0 (space) FSK supports:. clip call waiting network date & time message wait indication for voice mail 2) STRONG BRAND NAME Reliance India brand has emerged #1as the most trusted telecom brand in the country and #3 as India s most trusted services brand. (Source- A.C.NIELSON, ORG-MARG). Reliance India mobile toped the list in the talk tone category. Reliance industries ranked no.2 in overall leadership, financial soundness, long - term vision, companies that others try to emulate No.5 in innovative in responding to customer needs (Source-Far Eastern Economic Review (FEER) survey). Reliance emerged at NO.2 in the category of overall best managed company of India in Asia money Vimal lead amongst textile brands in India s most trusted category. Reliance mutual fund ranked third in money marketing'. Reliance won national award for excellence in corporate governance 2003 from the institute of company secretaries of India. Doctoral Thesis by Sharad Singh 86

3 3) Infrastructure The reliance Infocomm project is an incredible effort to establish a dominant presence in the telecommunications industry. Rs 25,000 crore have been earmarked to be spend on the total project. 60,000 kms of optic fibre backbone that connects over 90% of India's population Wireless network being rolled out in 600+ cities/towns initially; expanding to the entire landmass of India by ,588 Base Transceiver Stations (BTSs) across the country, for our wireless network Network with superior reliability 4) RELIANCE FINANCIAL STRENGTH Reliance total assets have grown from Rs 6083 crore (us$1.9 billion) to Rs 71,157 crore (us$16,277 million) over the last 11 years This has been achieved with the debt: equity ratio being brought down from 0.84 to 0.56 in the same period, indicating financial conservatism of a high standard Reliance has consistently maintained its 'AAA CREDIT RATINGS, indicating the company s financial strength and flexibility Reliance group has a gross turnover of Rs 74,418 crore (us$17,022 million) for the year Reliance group gross profit is Rs 10,983 crore (us$ 2512 million) for the year Cash profit is Rs 9197 crore (us$1,180 million) for the year Reliance s increasing annual cash flows enable the company to pursue major growth opportunities Net profit is Rs 5160 crore (us$1,180 million) for the year First Indian private sector Company to record net profit over us $1 billion Reliance group contributes: - over 6 percent of India s total exports. Reliance products worth Rs crore were exported during the year. Doctoral Thesis by Sharad Singh 87

4 PARAMETER INDIA RELIANCE % US$BN US$BN Gross turnover as % of GDP % Indirect taxes % exports % BSE market cap % Weightage in sensex 16% Weightage in MSCI 15% - nearly 10 percent ol the government of India s indirect tax revenues. Reliance contributed a total of Rs crore to the national exchequer in the form of various taxes RIL alone accounts for: -17 percent of the total profits of the private sector in India -7 percent of the profits of the entire corporate sector in India -6 percent of the total market capitalization in India -weightage of 13 percent in the BSE sensex -weightage of 10 percent in the NIFTY index -One out of every four investors in India is a reliance shareholder KEY CONTRIBUTION TO INDIAN ECONOMY Largest contribution by a single business house Doctoral Thesis by Sharad Singh 88

5 RELIANCE S LEADERSHIP POSITION IN INDIA US $bn Rank Sales Exports Cash flow Net profit Net worth Assets Market capitalization Among the worlds top 200 companies in profits 5) Network reliability To ensure smooth and hassle free services to its subscriber s reliance has adopted the following technology: - Ring Architecture in the core, collector as well as last mile - Redundant paths in case of fiber cuts - Restoral time of less than 50 ms - Cell On Wheels(cow) facility in areas where the network coverage is weak - Patch antenna for its FWT AND FWP 6) COMPETITIVE CALL RATES: Reliance is offering tariff plans that suit every need for national and international calls Doctoral Thesis by Sharad Singh 89

6 7) INCREASED NETWORK RELIABILITY To ensure smooth and hassle free services to its subscriber s reliance has adopted the following technology: - Ring Architecture in the core, collector as well as last mile - Redundant paths in case of fiber cuts - Restoral time of less than 50 ms - Cell On Wheels(cow) facility in areas where the network coverage is weak - Patch antenna for its FWT AND FWP WEAKNESS 1) LATE ENTRANT IN THE MARKET: Reliance is a relatively late entrant in the telecom market, as compared to its competitors. To add to the problem is that its major competitors are BSNL and MTNL which have their foot firmly set in the fixed line telephony sector. To convince the customers to go for its services is going to be a difficult task for reliance. 2) DISSATISFACTION WITH RIM: Many users of RIM are dissatisfied with its services and there is a general apprehension among the prospective customers whether the FLP services will also be of the same standard. This will be a major hurdle for reliance FLP to cross 3) HUGE BAD DEBTS Reliance Infocomm provisioning for bad debts for the year amounted to 16 per cent of service revenues, among the highest in the industry. The average industry standard for bad debts is 3 percent to 4 percent. Doctoral Thesis by Sharad Singh 90

7 The company provisioned Rs 436 crore for bad debts, while service revenues for the year amounted to Rs 2707 crore. This lends credence to the rumours in the market that many customers were cheating the company by disappearing, not paying up, not even receiving bills, etc. The huge amount of bad debts is due to the following reasons:» The monsoon hungama offer of last year fetched one million applications within the first ten days of its launch. This unprecedented response gave rise to logistics, billing and collection problems for the company. Also in the initial aggressive launch customer verification was not very stringent 4) LACK OF COORDINATION It has been observed that there is a lack of coordination between various departments of the company, which has lead to a number of problems for the company. There is no clear authority-responsibility (accountability) relationship in the various departments (sales, customer care and commercial). All the three departments were working in isolation of each other, and their activities were not being guided or controlled by any single authority, which was very essential because all the three are highly interrelated to one another. What this resulted in was that the sales department just fulfilled their sales target without doing any proper verification of the subscribers and giving them certain misleading information about the company s products and plans. This lead to lot of defaulting customers, whose whereabouts and addresses could not be traced, ultimately leading to huge bad debts for the company. The Doctoral Thesis by Sharad Singh 91

8 customer care department was unable to redress the problems of the subscribers because they were not fully aware about the company plans and also they have to resort to the central office for every small decision. The commercial department had to come across the problem of realizing the dues from customers because many of the customers do not receive their bills on time, which has lead to huge accumulation of the bill amount, and they are unable to pay the complete amount in one single go. The customers also complain of receiving inflated bills. It was also noticed that the subscriber address in a number of cases was in correct. OPPORTUNITY 1) HUGE UNTAPPED MARKET India s teledensity is much less than the worlds average, in both rural and urban areas. Thus, there exists a huge untapped market that remains to be captured by both old as well as new entrants in the telecom sector. 2) INCREASING INTERNET SUBSCRIBER BASE The numbers of internet users are increasing day by day. Reliance with its huge network of broadband cable can satisfy the customer demand of faster surfing on the net at a price much below than the present providers. Doctoral Thesis by Sharad Singh 92

9 Reliance satisfy the customer demand N o, o f S u b s c r i b e r s Doctoral Thesis by Sharad Singh 93

10 3) INDIA S INFOCOMM OPPORTUNITY BY 2007 Segment/business No. of customers Ability to pay ($/month) Potential annual revenue Consumer/SOHO 170 mn $8 $16 bn (wireless) Consumer/SOHO 90 mn $ 12 $13 bn (wireline/broadband) Large enterprises (wireless and broadband) 8000 $20,000 $2 bn Small and medium 8 mn $ 100 $9 bn enterprise (wireless and broadband) Total 180 mn unique customers - $40 bn Indian Infocomm market currently at us$ 14 bn- under served in voice, data, computing and applications for consumer and enterprise A population of over 1 bn individuals - teledensity to grow to 25% Infocomm revenues to grow to $ 40 bn by ) HUGE PERCENTAGE OF BAD DEBTS Reliance Infocomm provisioning for bad debts for the year amounted to 16 per cent of service revenues, among the highest in the industry. The average industry standard for bad debts is 3 percent to 4 percent. The company provisioned Rs 436 crore for bad debts, while service revenues for the year amounted to Rs 2707 crore. This lends credence to the rumours in the market that many customers were cheating the company by disappearing, Doctoral Thesis by Sharad Singh 94

11 not paying up, not even receiving bills, etc. The huge amount of bad debts is due to the following reasons: - The monsoon hungama offer of last year fetched one million applications within the first ten days of its launch. This unprecedented response gave rise to logistics, billing and collection problems for the company. Also in the initial aggressive launch customer verification was not very stringent THREAT 1) INCREASE IN MOBILE SUBSCRIPTION More and more people are preferring mobile services in comparison to fixed line phones, because of easy availability,better services and attractive tariff plans. 2) Competition from BSNL Reliance fixed line faces huge competition from state owned BSNL, which has been in the basic telephony market from the very beginning and has enjoyed monopoly status till now. It is going to be a very difficult task to grab market share from them. 3) TRAI GUIDELINES AND POLICIES The telecom regulatory authority of India (TRAI) governs and monitors the Indian telecom sector by formulating various policies and guidelines that all the companies have to adhere to. Any changes regarding the tariffs that are to be charged are first to be submitted to tray for clearance. It TRAI makes any Doctoral Thesis by Sharad Singh 95

12 changes in the tariff plans of the company, or does not approve any pricing policy, then the working of the company can be affected adversely. Case- GOM DECISION ON UNIFIED LICENSING TRAI recommendations on unified licensing have been accepted by the government, but the cellular industry considers this as partisan, one- sided and biased and drafted with a single end- objected to legitimize WLL(M) as full cellular. SWOT ANALYSIS STRENGTH WEAKNESS STRONG BRAND NAME RELIANCE FINANCIAL STRENGHT NETWORK RELIABILITY TECHNOLOGY NATIONWIDE COVERAGE UNIQUE SELLING POINT CDMA TECHNOLOGY CUSTOMER DISSATISFACTION HUGE % OF BAD DEBTS LACK OF COORDINATION OPPORTUNITY THREAT HUGE MARKET CHANGE IN GOVERNMENT INCREASE IN THE INDIAN POLICY CUSTOMER TELECOM TRAI GUIDELINES AND EXPENDITURE POLICIES COMPETITION Doctoral Thesis b j Sharad Singh 96

13 RELIANCE INFOCOMM BUSINESS AREAS Reliance Infocomm will offer a complete range of telecom services, covering mobile and fixed line telephony including broadband, national and international long distance services, data services and a wide range of value added services and applications that will enhance productivity of enterprises and individuals.reliance India Mobile, the first of Infocomm's initiatives was launched on December 28, 2002, the 70th birthday of the Reliance group founder, Shri. Dhirubhai H. Ambani. This marks the beginning of Reliance's dream of ushering in a digital revolution in India by becoming a major catalyst in improving quality of life and changing the face of India. It aims to achieve this by putting the power of information and communication in the hands of the people of India at affordable costs. Reliance Infocomm will extend its efforts beyond the traditional value chain to develop and deploy telecom solutions for India's farmers, businesses, hospitals, government and public sector organisations. - WIRELESS - BROADBAND WIRELINE - LONG DISTANCE - INTERNET SERVICES - INTERNET DATA CENTRES - RELIANCE WEBWORLD ORGANISATION STRUCTURE OF RELIANCE INFOCOMM The organization structure defines various levels of organization i.e. businesses, work centers, functions, circles, cities, etc. The Reliance Infocomm organization structure includes: Doctoral Thesis by SharadSingh 97

14 Business units: enterprise, customer, wholesale, SAX & webstores Work center: network (O&M- wireless, O&M- NLD/ILD,0&M-IDC,0&M-0SP,EWClong distance, EWC- wireless, EWC-wireline, OSS.ITC.NOC), Call center, BSS,(CRM, RA), billing & collection, application & solutions group. Functions: HR, commercial, purchase/logistics, it infrastructure, corporate staff. WORK LEVELS: The organization structure also defines the organizational functions considering the nature and scope of functions to be performed. The following four work levels broadly indicate the nature of accountability and responsibility assigned to role-holder at that work level. L-1- leadership role, accountable for participating and leading strategy creation/direction. Overall business/team performance responsibility for designated area. L-2- Managerial role, accountable for execution of business plan and achievement of team/individual targets. Be responsible for maintenance of key company assets (customers, physical assets, and people) L-3- executive role, responsible for achieving individual/team targets. L-4- support role, responsible for performing assigned activities and support other work levels. Reliance Infocomm financial overview Service revenues were Rs 2,707 crores (US$ 619 million) during the year. Despite making an operating cash profit of Rs 596 crores (US$ 136 million), Reliance Infocomm had to respond to the situation and resort to a onservative measure of providing for bad debts amounting to Rs 436 crores (US$ 100 million). The cash profit, after provision of bad debt was Rs 160 crores (US$ 36 million), depreciation and amortisation was Rs 550 crores (US$ 125 million), Doctoral Thesis by Sharad Singh 98

15 resulting in a net loss of Rs 390 crores (US$ 89 million). The impact of the Infocomm business on the consolidated results of Reliance Industries Limited for the year ended March 2004 is a loss of Rs 265 crores (US$ 61 million). With the acquisition of Unified Access Services Licences, all legal wrangling is now behind us. Reliance Infocomm is expanding services from about 1,100 towns to about 5,000 towns in a phased manner, in order to reach un-served markets. This second phase expansion will result in Reliance Infocomm services being available to over 100,000 villages. On completion of this expansion, Reliance Infocomm will have a capacity to cater to 40 million mobile subscribers. Reliance Industries has invested Rs 10,463 crores (US$ 2,393 million) in equity and convertible preference shares of Reliance Infocomm. With investments in the last mile, these assets will be leveraged to generate superior returns from the Infocomm business in the ensuing future. The Reliance Group founded by Dhirubhai H. Ambani ( ) is India's largest business house with total revenues of over Rs 99,000 crore (US$ 22.6 billion), cash profit of Rs 12,500 crore (US$ 2.8 billion), net profit of Rs 6,200 crore (US$ 1.4 billion) and exports of Rs 15,900 crore (US$ 3.6 billion). The Group's activities span exploration and production (E&P) of oil and gas, refining and marketing, petrochemicals (polyester, polymers, and intermediates), textiles, financial services and insurance, power, telecom and Infocomm initiatives. The Group exports its products to more than 100 countries the world over. Reliance emerged as India's Most Admired Business House, for the third successive year in a TNS Mode survey for Reliance Group revenue is equivalent to about 3.5% of India's GDP. The Group contributes nearly 10% of the country's indirect tax revenues and over 6% of India's exports. Reliance is trusted by an investor family of over 3.1 million - India's largest. The Reliance Group Companies include:relianee Capital Limited, Reliance Telecom Limited, Reliance Infocomm Limited, Reliance General Insurance Company Limited, and Reliance Energy Limited. Doctoral Thesis by Sharad Singh 99