Reliance Industries a generation behind on 4G [Telecom] [Times of India]
(Times of India Via Acquire Media NewsEdge) MUMBAI: Two-and-a-half years after Reliance Industries made a dramatic re-entry into telecom, it is yet to finalise a concrete plan of action to launch its much-hyped 4G technology services, according to sources from the company, industry and the vendor community.
In June 2010, when RIL bought Infotel Broadband Services for Rs 4,800 crore, a day after the company emerged as the only firm to win national broadband spectrum, it sparked off a furore in telecom circles. Since then, rivals have been on tenterhooks awaiting a big-bang launch and aggressive pricing from RIL; vendors have been on their toes anxious to win the big equipment contracts they bid for and employees have been on the edge, keen to get the project on the roads.
But for all of them, intense anticipation may be turning into frustration as the project has been slow to move despite RIL's famed project execution skills. Flux is what predominates RIL's 4G project now.
"I see nothing in the market... I see zero infrastructure (on the ground). Not much movement (elsewhere). So no worries, because I don't know what to be worried about," said the CEO of a leading telecom operator in the country. Another rival CEO also echoed similar thoughts. "We have all but given up (on getting equipment orders from RIL for the project)," a source from the vendor community admitted, speaking on condition of anonymity.
To be fair, Reliance had never set an official launch date. So there is no question of it falling behind schedule.
"There is no deadline pressure because we don't have one," said a senior employee of the RIL group, speaking unofficially. "We will do the right thing at the right time, depending on what makes sense for us on a longterm basis." A RIL spokesperson declined to respond to a detailed questionnaire emailed by ET.
At least three things have contributed to the flux. First, RIL's shift in strategy - it seems to have abandoned its initial asset light strategy for a more capital intensive model. Second, uncertainty has surrounded major vendor contracts; at least one contract was awarded and terminated and another new contract is yet to be awarded months after vendors submitted bids. Third, there was a rethink on the consumer segment it would initially target.
Early hints of RIL's 4G plan were dropped by Mukesh Ambani at an RIL AGM in June 2010. "To build this wireless digital distribution platform, we plan to follow an asset light, but partnership-heavy approach," he had said. "We will collaborate with strategic partners, such as service providers, infrastructure providers, device manufacturers and other participants in the ecosystem." The plan was to lease network infrastructure including optic fibre cables and telecom towers, not build it.
About a year later, signs of a rethink emerged and reports of an RIL plan to lay its own optic fibre trickled in. Plans were drawn. Some pilots were initiated in Mumbai and Delhi. Himachal Futuristic, the company's network partner and also a 5% shareholder in Infotel Broadband Services, laid some last mile fibre in Mumbai and Delhi. But this still remains unused and largely unconnected, said a person involved with the project.
Then, Alcatel-Lucent was engaged in early 2011 to put together a partial network plan, but contractual talks were terminated by RIL that December after Alcatel submitted an early plan, sources from the vendor community say. They add that RIL squeezed Alcatel-Lucent on price to a point where the contract no longer made financial sense for the latter.
RIL's shift from the earlier 'lease the infrastructure' model to 'build your pipes' strategy spelt significant changes in the business model. Industry sources estimate that RIL's capex plan for the 4G rollout would have now gone up to almost $8-9 billion from the $4-billion figure company sources disclosed at the 2010 AGM.
In March 2012, the company went to vendors with a plan to build 1,00,000 telecom towers. At Rs 20 lakh to Rs 30 lakh a tower, that totals up to Rs 20,000 crore. The deal size made vendors drool and willing to pare profit margin. A bunch of vendors submitted bids around April. RIL is yet to award the contract, officials from companies that have submitted bids say.
"RIL keeps asking for bids and plans, but is yet to place an order. It wastes a lot of sales staff time," says one vendor who has engaged with the company for many months now. "They will never leave vendors hopeless for even one day; as if they will place an order tomorrow. But we have asked our teams to stop investing time on this till an actual order comes now," adds another. At this juncture, executing a plan like this (build your infrastructure) would take over a year, which is time RIL doesn't have if it hopes to compete, says an analyst who asked not to be named.
A senior person at a major tower company said RIL has once again started to engage with the company to lease towers, but is pressing for rentals that are too low.
There has also been speculation that RIL may strike a tower-sharing deal with Anil Ambani-owned Reliance Communications (RCom). "RIL has asked us to submit two sets of plans. The first assuming a rollout from scratch and the second assuming RCom's towers will be part of the RIL network," a vendor said. RCom has 48,000 towers. Earlier known as Reliance Infocomm, it was originally part of RIL, but was transferred to Anil Ambani when the two brothers split in 2006.
The customer conundrum
Vendors also feel the 'slow progress' could be due to a shift in the customer segment RIL plans to target with its 4G services.
In an earlier interview, a top ranking company official had said that the initial plan was limited to key business clients in the burgeoning small and medium enterprises (SME) segment; those that can't afford dedicated leased lines, but require high speed connectivity and services.
Such a rollout could have been rapid - RIL only needed to para-drop much of its network and infrastructure onto the key business centres in cities.
This, for example, is the approach Bharti Airtel took in Kolkata, and managed to get off the blocks fast. It launched 4G services in Kolkata in April, the first such in the country.
But vendors say that Reliance Industries later changed its mind and chose to go after retail customers too. This meant that its 4G network would have to cover the entire city like a blanket; not just the business hubs. This also meant more wireless emitters, backend connectivity and even end-user devices such as mobile phones and tablets.
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