Reliance Communications strategies to cut costs and improve revenue

Indian telecom service provider Reliance Communications has shared its long term strategies to cut costs and improve revenue.

As part of the strategy, the Anil Ambani-promoted Reliance Communications is looking at reducing network costs by 10-12 percent. Ericsson and Alcatel-Lucent are some of Reliance Communications’ telecom equipment vendors in India.

The mobile operator has already signed outsourced network management services deal with Ericsson (North & West India) and Alcatel-Lucent (East & South India).

The mobile operator looks at reducing consumable cost in batteries / solar power, managed services and IPO co-location of sites.

Reliance Communications manpower

Reliance Communications, headed by its wireless CEO Gurdeep Singh and team, is also trying to create a leaner organisation by moving around 9,500 employees to partner rolls, providing them global opportunities. It will reduce investment risks with pre-defined costs targeted towards enhancing customer experience.

In a recent analyst meet, Reliance Communications said it would shift 5,500 contact center staff to third party BPOs for enterprises, international calls and back office business. This is aimed at improving efficiency of service centers, allowing focus on revenue enhancements.

Reliance Communications says it will reduce gross customer acquisition cost by 10-15 percent by looking at downward revision of channel commission and controlling indirect cost.

It will reduce manpower by 3,500 to 5,500. There will be new organization structure focusing on regions as compared with its current thrust on hubs. Reliance Communications will become a customer facing organization with greater empowerment.

Reliance strategies to improve revenue and reduce costs

Reliance Communications Capex

Reliance Communications has already reduced its Capex (capital spending) in the last three years. Its Capex reduced to $643 million in FY 2013 from $959 million in FY 2012 and $1,633 million in FY 2011.

Its strategic focus would be on cost management and margin expansion. The telecom operator will aim for improving network coverage without additional Capex. Its intra circle roaming agreements are in this direction.

Reliance Communications data focus

Reliance Communications’s 3G focus reflects some of the telecom analysts’ reports. Recently, ABI Research said 3G and 4G will coexist for a long period of time just like the previous generation 2G and 3G technologies did. While 3G is still the predominant access technology, and expected to remain so for the next five years, LTE and 3G/LTE multimode femtocell are showing significant growth in shipments as well.

Reliance Communications says data to account for around 40 percent of incremental revenue in coming years. Small and large screen devices will drive revenue growth.

Reliance Communications boasts the highest non-voice revenue as a percentage of mobile revenue. For Reliance Communications, non-voice revenue contributes 21.3 percent in Q1 FY 2014 against 20.2 percent in Q1 FY 2013 against Airtel’s 17.3 percent (16.3 percent) and Idea Cellular’s 16 percent (14.5 percent).

The Mumbai-based Reliance Communications enjoys the highest data traffic with 31,050 million MBs (15,840 million MBs) against Airtel’s 27,271 million MBs (12,566 million MBs) and Idea Cellular’s 13,791 million MBs (7,175 million MBs).

Reliance Communications’ data usage per customer is 342 MB (240 MB) as compared with 203 MB (112 MB) for Airtel and 160 MB (139 MB) for Idea Cellular.

Five telecom operators — Reliance Communications, Idea Cellular, Tata Teleservices, Vodafone India and Bharti Airtel – command 84 percent of mobile service revenue in India.

Baburajan K
editor@telecomlead.com