Reliance Communications to split GSM unit from CDMA

Mumbai – Reliance Communications is undergoing a new round of restructuring, aimed at separating the mobile phone major’s growing GSM business from the lagging CDMA operations, which could even be sold off at a later stage to pare debt.

People familiar with the matter said Nilanjan Mukherjee, currently the chief marketing officer, is set to head the CDMA business of the company, which was once the second-largest mobile phone operator in India but has since slipped to fourth. Former Bharti Airtel zonal head Ramesh Menon will be joining on Monday to handle GSM. Both will report to Gurdeep Singh, the current chief of the company’s wireless operations.

An e-mail to Reliance Communications went unanswered. The people quoted earlier said that the separation of businesses, part of the third company-wide rejig exercise since December 2011, is taking place in the wake of the CDMA business – a shrinking technology globally for voice but efficient for data – requiring a strategy independent of the GSM unit. Nearly 80% of mobile phone subscribers in India use GSM technology while the rest are on CDMA.

One of the people said the company may look for a buyer for its CDMA business given it has spectrum and certain assets that may be valuable to someone launching 3G services. This would bring in much needed cash to bring down the company’s debt, which stood at Rs 41,170 crore at end of September. The CDMA licence expires in six years.

RCom started with services on the CDMA platform but began offering mobile services on GSM as well after operators were allowed to offer both technologies in 2008. The company is increasingly trying to push voice traffic on GSM, leaving the CDMA bandwidth free for the growing data business.

The fresh restructuring not only intends to split the two technologies, but also create circle specific managements to carry through more regional focused strategies and plans, said one of the people quoted.

“One year ago we decided the organisation will be spectrum-led, and to move away from the one-size-fits-all (model),” the person added. He further said that circles are now empowered to run their own sales, finance, HR, legal, and network (departments).

The company has also brought in some new people as a prelude to the separation of the GSM and CDMA businesses.

Amit Das from Vodafone India is now heading human resources while Munish Kanotra, ex-senior vice president, Bharti Airtel, is leading the post-paid and data business. Deepak Khanna from Tulip now heads the enterprise pie. Under the recast, Shamik Das, who was the chief operating officer of the overall company, will be allotted a new role, one of the key people involved in the reorganisation said. Reliance Communications underwent a substantial rejig in December 2011 when it inducted Shamik Das from Sistema Shyam TeleServices – which operates the MTS brand – as COO, under Syed Safawi as chief executive.

Till then the company was divided under four regional verticals North, South, East and West. Das was made responsible for operations, including retail, distribution and customer management. Under him were seven to eight hub leaders handling designated circles; India is divided into 22 such circles, or service areas.

Safawi exited Reliance Communications in March 2012, and Singh came on board in May that year. Around six months into his tenure, the circle-wise sub-division of the company was reversed to the earlier centralised management in five zones.

Since his arrival, Singh has spoken of increasing data and post-paid customers. Singh’s two-year contract itself comes up for renewal in April, said one of the people. Since his appointment, the company reversed the trend of falling revenue in mid-2013, but profits have still been under pressure due to the company’s debt burden. In the second quarter of this financial year, RCom recorded net profit of Rs 675 crore on revenue of Rs 5,835 crore.

Efforts by the company to sell parts of itself or its units to cut debt haven’t worked out so far, though it has tied up infrastructure sharing deals with Reliance Jio Infocomm, a unit of Reliance Industries headed by Anil’s elder brother Mukesh which is expected to bring in some Rs 800 crore annually.