Ambani calls the right numbers

PEOPLE WHO MADE A DIFFERENCE/MUKESH AMBANI

It was a year of extraordinary lows and highs""one that began with a blanket of gloom hanging over the Indian industrial scene and was headed for a glorious end with the stock market stampeding towards 6,000.

Business Standard profiles some businessmen and others who put their reputation on the line to turn 2003 into a year that may be seen as a watershed in India's economic history

It was a classic masterstroke. Earlier this week, Reliance Infocomm threw the telecom world into turmoil by abolishing roaming charges for its on-the-go customers travelling from one part of the country to another.

The move came as a jolt to rival mobile operators, who quickly went into a huddle on how to respond to the latest challenge.

Most know they have no choice but to follow suit, and indeed, Hutch has announced that roaming facilities will be free for its post-paid customers.

It was a quintessential Mukesh Ambani-style tactic that he has perfected in the past year. Slash tariffs to woo customers and catch your rivals off-guard.

There is also another all-important angle according to critics--lobby relentlessly to shape the regulatory environment to your needs.

When Ambani launched his limited mobile services a year ago, doomsayers predicted it would turn into a costly disaster.

After all, the Ambani empire had made its name in manufacturing and had a poor record in any enterprise where retail customers were involved.

What is more, for the first time Reliance was facing battle-toughened rivals like SingTel and Hutch, which had massive financial clout and years of experience in telecom all over the world.

To make matters worse for Reliance, the cellular operators went to court against the company's right to offer limited mobile services, leaving the future of its operations in doubt.

Now all that is history. Despite these obstacles, Reliance has roped in over 6 million customers. It has become the country's largest mobile operator, leaving rivals like Bharti and Hutch trailing, and all that in less than 12 months.

And unlike the other telecom giants, Mukesh Ambani openly boasts that he will record a profit in the first year of operation.

That is not all. Ambani has turned the tables on his competitors after the government decided to introduce unified licensing in the telecom industry. This allowed Reliance Infocomm to offer fully mobile services after paying a fine.

Unified licensing was, perhaps, the only way out of the telecom maze. But it was also a solution that suited Ambani perfectly.

Says a GSM operator who has been at the forefront of the battle: "It is amazing how Reliance has been able to get what it wanted. It is a clear reflection of its political clout."

The fight between Reliance and the other cell operators, of course, is not over by a long shot. Reliance is expected to come up with a new aggressively priced offer for its pre-paid customers in the next few days, and its rival operators say they are preparing strategies to counter the move.

Notes a GSM operator: "Pre-paid constitutes 80 per cent of the cellular business, and Reliance has been conspicuous by its absence in this segment. What we will now see is an all-out marketing battle."

Wednesday's Rs 980 crore largesse to cell operators together with a financial restructuring may prompt the GSM players to further cut prices and take on Reliance.

But Ambani is not playing a purely numbers game. He is working on a larger vision in the telecom sector. He is bullish about the possibility of a data revolution in India through broadband.

And as part of this strategy, Reliance decided to pull out its chequebook and snap up undersea cable company Flag Telecom for $207 million.

Many analysts say Ambani has paid too much for Flag (the Tatas are believed to have offered only $100 million).

But Ambani believes that control over Flag could give Reliance a strong hold over broadband connectivity between India and the rest of the world.

However, there are risks. There is a chance that the Flag acquisition may lead to a long-drawn battle between Reliance and the Tata-controlled Videsh Sanchar Nigam Ltd (VSNL).

That is because VSNL controls Flag's landing station in India. Reliance has complained that VSNL is not giving it enough capacity.

But Reliance cannot expect easy victories in the telecom industry. It has rich, powerful and tenacious rivals.

Says a GSM operator: "Frankly their costs and our costs are virtually the same. So there is nothing that they can do and we cannot. If they want to bleed, so will we."

Many analysts also note that Reliance has made it easy for customers to sign on, and it is expanding at a rapid pace. This combination could lead to huge bad customer debt.