LEADER ARTICLE
Networked for Success: Reliance in Telecom Overdrive

Just three months ago Arun Shourie surprised everyone by remarking at the first Dhirubhai Ambani memorial lecture that Reliance’s success lay in the fact that it bent growth-restricting rules.
This ‘rule breaking’ was a reference to the exposes the newspaper he then edited carried over a decade ago. For those observing the unfolding telecom drama, there is a sense of deja vu.
The cellular operators have charged the government, the tribunal, the regulator, and the minister, of aiding Reliance by legitimising the company’s limited mobility offering on Wireless in Local Loop (WLL) phones. While, in its recent order, the regulator acknowledged that the company indeed was breaking the spirit of the licence by offering virtual mobility on its WLL phones, it offered the corporate a way out through the payment of a penalty.
The regulator has recommended to the group of ministers (GoM) on telecom that fixed operators should, for a fee, have the liberty to move to a unified licence regime that would allow them to offer full mobility. For those who don’t want to switch, the GoM would work out ways to restrict their mobility. So, for the biggest player in the WLL arena, the regulator’s move clears all hurdles to become a full mobile player. This is what any major telecom player would want to be, given the fact that tele- communications is moving rapidly towards full mobility. Predictably, the cellular operators are not impressed as they feel that the fine and the proposed unified licence merely legitimises the wrong, and have challenged it in the Supreme Court.
Unfazed by these allegations, Reliance continues to build an enviable network comprising, among other things, a 60,000-km-long fibre optic cable system which criss-crosses the country. It has created an infrastructure to take on anyone and its bouquet of services include wireless, wired, data, speech and video. All the private telecom players, including the large public sector Bharat Sanchar Nigam Ltd (BSNL), are feeling the heat. If Reliance, as its critics claim, knows how to bend the rules, the same critics also acknowledge, albeit grudgingly, that the company has the ability to create top-class infrastructure.
The recent acquisition of FLAG (Fibre Optic Link Around the Globe) undersea capacity suddenly takes operations to a different level. In one stroke, the corporate enters the lucrative International Long Distance (ILD) market, competing with Bharti and VSNL. Though there will be challenges from other available undersea capacities, no one is willing to write off Reliance’s ability to turn around loss- making FLAG’s sagging fortunes. Reliance got FLAG at an attractive Rs 1,000 crore.
Compare this with the fact that the Tatas acquired 25 per cent stake in VSNL, the then monopoly international traffic carrier, for Rs 1,436 crore, Reliance’s reputation of making minimal investments in exciting opportunities is now reaffirmed. Interestingly, when the Tatas acquired VSNL, Reliance was said to have lost out. But the subsequent loss of business and BSNL, its largest customer, playing difficult, make that acquisition a costly mistake.
With Reliance’s ascendance, one wonders what the future of BSNL will be. But does it deserve any better? Earlier this month, the top brass of the corporation was in Geneva for a telecommunications show. The officials spent upwards of a week in the Swiss city with their spouses, engaged in such pursuits as garnering attractive bags being doled out for participants. In short, everything but furthering the corporation’s business interests. If this is the calibre of people at the top, then why shed tears at the demise of the corporation they run.
The private sector operators too are seeking a much bigger piece of the telecom pie. So far, all their well-planned moves have been rendered ineffective. It is easy to blame the R factor for their sorry state, but the real culprit is the government. For corporations the world over, managing the system, moulding it, exploiting loopholes and lobbying for policy changes is common. They are in the business to make money and will do everything possible to exploit the system. That is what corporations here too have done. Of course, some are more successful than others. It is for the government, in this case the regulators and the political establishment, to ensure that things are not allowed to go out of hand.
Of course, there is frequent talk of finding a solution. However, the problem has become so tangled that any solution the government works out will be challenged by one vested interest or another.
As for Reliance, it marches on regardless, just as it did over a decade ago in the petro sector, to emerge as the numero uno. It then left a lot of shattered dreams, aspirations and corporates behind. Some years from now, people will talk only about its great telecom network, just as they now talk about its marvellous petro infrastructure. But the shenanigans that went on during its creation will be forgotten. Perhaps some will rue the lack of competition too, because it seems unlikely that many will survive. But then, the accusatory finger should point at the pliant government which has failed to act when it was needed to, instead of at a company which only did what it thought was in the best interests of its shareholders.