RCOM to Merge Three Biz Divisions

Move likely to make around 10% of its 7,000 executives redundant

JOJI THOMAS PHILIP NEW DELHI

    Reliance Communications (RCOM), India’s second-largest telco by subscribers, is merging its three business divisions, a move that will make around 10% of its 7,000 executives redundant and also result in redeployment of another 2,000 employees to ‘field functions’.
The telco will collapse its existing business units that are carved out geographically – North, South and East – into a single entity reporting to a chief operating officer, who will be recruited from outside by the month-end, executives with direct knowledge of the developments told ET. All support functions such as customer services, IT operations, networks and products amongst others will be moved to a newly-created ‘services division’. After restructuring, around 75% of RCOM’s employees will do ‘field roles’ to drive sales execution as against 60% currently. RCOM now joins Bharti Airtel and Tata Teleservices, who recently carried out major restructuring exercises by merging business verticals and reducing employee headcount. All telcos are focusing on cost-cutting measures to boost efficiencies as they fight multiple challenges of high debt burdens, slowing growth and high marketing spends amid cut-price tariffs. RCOM chief executive (wireless) Sayed Safawi said the telco was undertaking a ‘structural rationalization, including organisational de-layering, and making few key changes the leadership team ’.
“Eventually it may result in significant slimming of the organisation as a whole, especially at the back-end functional level, though the potential number impact is yet to be assessed,” he said and clarified that the ‘restructuring was not about head count rationalisation, but getting right resources at right places’.
The company’s northern region head Nilanjan Mukherjee will head the newlycreated ‘services division’, its current head of southern operations CS Rana has opted for ‘superannuation’, while Vivek Garg , who is in charge of the east, will be assigned a new role internally. Safawi dismissed as ‘rumours’ the market buzz that Bharti Airtel’s former president for mobile services Atul Bindal may he headed to RCOM.
RCOM, recently reported a 37% fall in profit for the three months ended June 2011, its eight straight quarterly fall and it remains weighed down by debt of over Rs 3,36,000 crore. It recently raised tariffs in 19 of the 22 regions by 20%. Safawi said that the company’s debt would come down by 50% after the sale of Reliance Infratel, its tower arm, and added that the full impact of the tariff hikes would be felt during the next two quarters. The restructuring, he said, would also help the company increase its focus on new revenue streams such as data, 3G, mobile commerce amongst others, he added.
RCOM is also increasing its number of regional hubs to 12 by making Mumbai a separate unit and all hubs will now report to the new COO.
“Each hub CEO manages businesses worth more than Rs 1,000 crore - these 12 hub heads are being empowered to lead wireless business like geographic CEOs,” Safawi said.RCOM has only 66% active customers, compared with Bharti Airtel and Idea Cellular at over 90%, and its other concern is that its 17% customer market share has not translated to a corresponding revenue market share.
“We are trying to improve the quality of our portfolio by focusing on 3G and data, enhancing the quality of minutes by doing away with free minutes and trying to improve the quality of our customers by targeting high-end customers and retaining them,” Safawi added.