Recent RCom’s managed services deal with Ericsson worth $1 billion has certainly stirred the dormant laying Indian Telecom industry for a while, but keeping facts intact, there’s little to cheer about deal in long run.
Let me share some points before we reach to conclusion:
- RCom is known to be a cheap service provider, who bundles services cheaply with low cost Chinese products to sell in the market. The strategy worked in year 2000, but people have become well versed with game & little will help Rcom to change the perception of quality.
- RCom has no focus on business. Surely, it has CDMA/EVDO, GSM & 3G in its portfolio to offer, but it appears that after lunch of CDMA services in market, company has drifted from launch agenda to non-focus areas & surely has to manage fragmented user base, which isn’t going to be an easy ball game. Same is true for Ericsson.
- Since start, RCom has relied on Chinese OEMs, namely Huawei & ZTE to outsource its majority of network procurement & manage services across all telecom circles/states. Well, these Chinese firms had little or no experience on Indian terrain and lost ample good opportunities to serve customers better during the process. Till date, cheap China has not worked well with RCom and nor for RCom’s customers. (Has it worked with Tata Tele or anyone else?)
- RCom is known as bad paymaster in the industry with too much liability piled up on accounts. The entire eco-system driven by RCom is already spoilsport with no zeal by vendors & suppliers to support operations. Can Ericsson fix this span of eight years?
- Well outsourcing to Ericsson is limited to North & West hub at present, but there’s catch. These are the high revenue circles of RCom (Delhi/Mumbai/MH/Guj) and little can be left to chance, if strategy fails. So something that’s not going to work here mightn’t work elsewhere in the deal. Moreover, RCom is getting rid off its 5k+ staff, which might help it showing good EBITDA in short run but won’t address real problem.
- Ericsson has proven record of managing two of the India’s leading telco networks, namely Airtel and Vodafone. But problem is, Airtel is losing its sheen & looking to find strategic solutions to its problems. Vodafone has remained elusive for Ericsson till date. If outsourcing has alleviated the pain of customers, then there’s rising Idea Cellular threat, who manages entire network in-house with little outside support.
Outsourcing can be fruitful, if the telco staff understands the technology and manages the pain of customer pro-actively. The logic is, you outsource the network services to your strategic partner (Ericsson/NSN/Huawei/ZTE/Alca-Lu) and focus on your core domain- customer acquisition/retention game. But network plays key role in subscriber acquisition & retention. So if you have better network in terms of call retention/reach/initiation, you will always find customers happy with little churn. And that’s loop-hole. When you outsource- you tend to outsource your customers to your strategic partner, entirely forgetting the fact that, the customers are all yours and paying you revenue in return of quality services- which you failed to deliver.
RCom has probably highest churn ratio in the industry or could only next to BSNL/MTNL in losing image. The perception of Indian Telecom industry stalwarts towards outsourcing or managed services has remained outdated. It’s just perception that Ericsson would make it better to stop churn or manage better or gain more customers. In the end, if you want to deliver best results, you go to field, talk to your customers and fix problems. You understand network better, because it’s your entire network built for your customers.
When was the last time RCom Executives did all these or going to do next time in near future?
