Anupam Shrivastava joined Bharat Sanchar Nigam Limited (BSNL) as chairman and managing director at a time when the company was at a financial and operational low. In the past one year, his direction and leadership has helped the company revive its operations. Excerpts from a recent interview…
What were the key policy and regulatory developments in the past one year that contributed to sector growth?
The biggest positive development during 2015 was the formulation of the merger and acquisition (M&A) policy. The policy has given a new dimension to consolidation in the industry. While the development of the telecom sector in India is cited as a success story, it suffers from low ARPUs and high debt levels. With the announcement of the M&A policy, the sector can now consolidate and progress further. In addition, the government has brought transparency in spectrum auctions. The 2015 auctions have been the smoothest auctions undertaken by the government so far.
How have the financials of the sector improved in 2015?
For BSNL, 2013-14 was possibly the worst year with operating profits becoming negative for the first time since its inception. In 2014-15, we could turn around the performance and post operational profits. BSNL spends almost Rs 150 billion on employee costs, which is 50-55 per cent of its overall expenditure. It is noteworthy that not only do we meet this huge administrative expenditure on our own without any government support, but we are left with sufficient cash to run our operations and maintenance activities and post positive profits. For the industry too, the lowest ebb is over. The year 2015 was very promising and 2016 is expected to consolidate on these promises.
What were the major steps taken by BSNL in 2015? What has been their impact?
BSNL was incorporated in 2000 and acquired the licence to operate mobile services in 2002, much later than the private operators. During 2002-06, we expanded at a very fast pace, making BSNL the top mobile as well as fixed line operator in the country. However, during 2006-12, the company’s growth stagnated even as the sector continued to expand. This was mainly because we could not acquire the equipment for our mobile network in time. In 2012, we got our act together once we acquired the required equipment and started plugging the holes in different cities and licensed service areas. This improved BSNL’s mobile network and increased our operational revenue by 4.16 per cent in 2014-15, to Rs 270 billion (the highest in BSNL’s operational history). With positive profits, in 2015 we were able to invest in other areas and launch new initiatives during the year. These include the launch of free roaming services, free night-time calls (from 9 p.m. to 7 a.m.) and public Wi-Fi services.
When we started the free roaming service, we knew that we would lose Rs 1.5 billion-Rs 2 billion on an annual basis. However, this strategy was aimed at adding more subscribers to our network and this is exactly what is happening. Up to June 2015, BSNL added 800,000-1,000,000 subscribers per month. And from July 2015 onwards, this figure rose to 1.6 million. In December 2015, it touched 1.75 million and in January 2016, we expect to add about 1.8 million subscribers to our network. Similarly, the free night-time calling had a revenue loss component associated with it. But the strategy was important from the point of view of retaining subscribers in the fixed line segment, which was witnessing a huge churn.
To address the challenge of growing competition in the 4G space, we took the public Wi-Fi route. Since we do not have sufficient spectrum to offer 4G, we decided to utilise our fixed line and optical fibre assets to install public Wi-Fi hotspots on a revenue sharing basis. We have already set up 630 Wi-Fi hotspots at 220 locations across the country. In addition, we plan to install 2,500 Wi-Fi hotspots in 250 locations by the end of the financial year.
Over the next three years, we plan to install Wi-Fi at 40,000 locations. Going forward, this will be based on both the revenue sharing and capex models. Apart from this, we are planning to launch 4G on the 2500 MHz band based on a revenue sharing model in about 14 licensed service areas. We have already done a soft launch of 4G on this model in Chandigarh.
“We believe that ‘cooptition’ is the key to future growth. BSNL will cooperate, collaborate, and yet compete in the industry.”
How has the uptake of BSNL’s data services been and how does it compare with private players?
In 2013, BSNL used to carry about 80 TB of data on a day-to-day basis on its network. Since then, the throughput to our network has increased by 2.5 times to 230 TB.
Earlier, data contributed 7-8 per cent to BSNL’s revenues in the mobile segment. This has since gone up to 12-14 per cent and this year, and is likely to go up to 15-16 per cent. Meanwhile, in the landline segment, the share of data is about 60 per cent. Overall, the contribution of data to the total revenue is around 25 per cent. For private telecom operators, data contributes about 20 per cent of revenues in the mobile segment.
What is the update on the merger of BSNL and MTNL?
The merger of BSNL and Mahanagar Telephone Nigam Limited (MTNL) has to happen as the two companies share various synergies in the mobile as well as enterprise spaces. However, three key issues need to be resolved to pave the way for this merger. First, MTNL has a debt of about Rs 160 billion, and so a decision has to be made on how this debt would be managed. Second, the salary structure of employees is different in BSNL and MTNL. Third, MTNL is a listed company while BSNL is not. Currently, a few agencies are providing consultancy to the government on this issue, under which modalities are being worked out to first synergise the operations and then look into the merger. There should be some progress on this front within a year.
What progress has BSNL made on the projects it is implementing as part of the Digital India programme?
Digital India is aimed at strengthening the country’s democratic pillar by providing government services digitally. BSNL is playing a very active role in this programme through the National Optical Fibre Network project, now renamed BharatNet. We have already connected about 35,000 gram panchayats with optical fibre cable (OFC). The government has revamped this project and is looking to engage state governments for its timely completion. By March 2016, overall 50,000 panchayats are targeted to be completed and this will be done by BSNL, RailTel and Power Grid, of which BSNL is definitely going to cross about 40,000 panchayats. Apart from this, our Wi-Fi initiatives will also strengthen the platform for Digital India.
Another key project that we have recently completed is the Agartala international gateway, which was aimed at providing connectivity to the north-eastern part of the country. Earlier, in June 2015, BSNL had signed an MoU with the Bangladesh Submarine Cable Company wherein from the Cox Bazaar centre in Bangladesh, bandwidth will be supplied to India at Agartala. The entire project, including the laying of OFC, was completed in a record time of six months. It is currently at the testing stage and soon people in the Northeast will start getting internet directly from this particular route.
What are the key issues and challenges faced by BSNL? What are your capex plans?
One of the key issues faced by BSNL is the expenditure on employees. Earlier, there were discussions on floating a voluntary retirement scheme to curb such expenditure. The plan was later withdrawn as it would have entailed additional costs and already 10,000-12,000 employees are retiring every year. Lately, there has been a lot of activity among the employees and the transformation from the government era to a public sector competition era has happened. Earlier, BSNL was largely seen as a technical department and less emphasis was laid on the service aspect. The employees have now started an initiative called “service-with-a-smile”, which can help encourage sales and thus revive the company.
BSNL’s capex plan for the next five years is very ambitious. The company will likely invest about Rs 390 billion, of which expenditure of about Rs 78 billion will be undertaken in 2015-16.
However, we will be cautious in investing in new technologies. For instance, the company had earlier invested in Wi-Max, but the technology quickly became obsolete and there were only limited returns on the investment. We have thus started expanding in the Wi-Fi segment through a revenue sharing model. This helps in testing the waters first and observing whether the equipment is working properly and will encourage the uptake of its services.
What are the key thrust areas for BSNL?
The key thrust areas for BSNL are mobile data, broadband and Wi-Fi. There has been an increased interest in broadband because of several technological innovations that have taken place. For instance, copper can now be used for providing bandwidth of 1 Gbps at a distance of 1 km. This holds importance for BSNL, as it already has an extensive infrastructure on copper. We are now planning to move closer to the consumer in order to provide better bandwidth. Apart from this, BSNL will continue to invest heavily in the core equipment to support all its services.
On the wireless side, we have a healthy mix of 2G and 3G sites. Of BSNL’s 110,000 base transceiver sites across the country, 70,000-72,000 towers are for 2G and the remaining are for 3G. Thus, the company has not invested in 3G data alone, but has also focused on improving its voice services. In fact, of the Rs 55 billion invested in BSNL’s Phase 7 expansion, 60 per cent was earmarked for improving voice infrastructure.
What is the company’s future strategy and outlook?
We believe that “cooptition” is the key to future growth. BSNL will cooperate, collaborate, and yet compete in the industry. For instance, offering free night-time calls and unlimited and roaming services is part of competition, while sharing of towers and networks to reduce costs and improve service quality comes under cooperation and collaboration. In addition, we are close to finalising a deal under spectrum sharing and trading to improve the provisioning of data services.