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From digging oil to carrying digital signals to conducting biotech research, it seems to be willing to straddle every possible business space on earth. A perfect play on brick-and-click economy, you may say. Yes, that is the Rs 355 bn M-Cap Reliance Industries all about. Though, the critics may claim that any guess could be hazardous at this point of time as its new economy ventures have just taking shape, the past record of the behemoth sends out strong signals that the Reliance Juggernaut is just not stoppable.

Of several of the new business ventures, it is trying to get into, convergence appears to be a key growth area for the petrochemical behemoth. Sample this: RIL's infocom venture is tagetting to invest a whopping Rs 25,000 crore over the next five years for setting up a 60,000 km nationwide terabit bandwidth, broadband network connecting India's top 115 cities across 12 states. This will be representing over 50% of the country's GDP. The company aims to become carrier's carrier by wiring such a vast space. According to the industry estimates, the total domestic long distance market size is roughly around Rs 6,000 crore and the market available to the long distance operator is Rs 2,400 crore based on the ratio of 30:40:30, comprising originator, carrier, and last-mile access service provider in that order. Of the estimated Rs 2,760 crore market in 2002-03, Reliance Infocom expects to garner 20% of this i.e. Rs 620 crore. 

The business model of Reliance Infocom is fairly comprehensive, covering the entire gamut of telecom services. The company aims to be a full service communications player: from back-end bandwidth to last-mile access, from fixed-line telephony to high-speed voice & data networks for corporates, and from submarine cables to cellular telephony. The Reliance gameplan is to extend its strategy of being on the complete value chain, which it successfully demonstrated in petrochem and oil and gas, to its infocom venture too by positioning itself in every segment of the telecom value chain: fixed-line services, domestic long-distance, international long-distance, mobile cellular, internet service provider and value-added services like IDCs (Internet Data Centres) and call centres.

Given the Group's ability to set up large-scale projects is tremendous, be it petrochem or oil and power sectors, where it has amply demonstrated its financial and execution skills. It came from behind in petrochemicals and took on the formidable players like IPCL and GAIL, it came from behind in polyester and took on the then powerful players like Baroda Rayon and Nirlon. Reliance's infocom venture too could prove to be yet another exhibition of its proven project execution skill. However, there remains to be some concerns. Comparing an emerging technology business area like infocom with oil and petrochem businesses could be a mistake, given their business dynamics and above all the fact that more than building infrastructure it is the technological innovation, branding and customer service that is what is important in the infocom play. This is evident from the lessons global giants like AT&T and BT have learnt the hard way. Going by the past experiences of AT&T, it appears that infrastructure cannot be the only determining factor for success. Further the full service model has failed to deliver in countries like USA. It is being said that such business models have failed to create the kind of value the focused business models like wireless service provider or internet infrastructure service provider have been able to create. This has been vindicated by the fact that because of this the yesteryear's full service players have been forced to unbundle their operations into areas such as broadband, international long-distance telephony, domestic etc. The reason being - it makes difficult for the investors to completely understand the different businesses bundled in a single entity, making it even more difficult for the companies to raise capital on such a complex business model. However, so far this "unbundling phenomenon'' has been more relevant in mature western markets where teledensity has reached saturation levels than anywhere else including India. Also, regulators in the developed countries like America have forced operators to split their business to avoid formation of a monopolist. Competition from more nimble footed, smarter, smaller and specialist last-mile service providers too have posed serious threat to monoliths. However, till that happens to Indian infocom space also, one is sure to witness a mega show from the Infocom venture called Reliance Infocom.

Amit Singh

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