Accounting for 37 per cent of the telecom sector’s revenues, Bharat Sanchar Nigam Limited (BSNL) is a key player in the sector, with a strong focus on rural connectivity and broadband penetration. Kuldeep Goyal, who recently took over as chairman and managing director of BSNL, spoke about the company’s expansion plans, future thrust areas, and key issues and concerns. Excerpts…
What is BSNL’s share in the telecom market?
BSNL has one of the largest networks in the country. As of August 1, 2007, the company’s fixed network, which includes wireless in local loop (WLL), commands 84 per cent share of the market with 36 million lines. The company had approximately 29.3 million wireless connections as of July-end, accounting for about 15 per cent of the market. Overall, of the 233 million connections, we have about 65 million, constituting 28 per cent of the total market. We plan to increase our market share further, from 28 per cent to 33 per cent, in the coming years.
What are BSNL’s future expansion plans?
On the mobile side, we have finalised an expansion plan order for 22.75 million lines. Of this, an order for 13 million plus lines has been placed with Ericsson, which is likely to be completed in about one year. This contract is worth $1.3 billion at Rs 3,700 per line. A letter of intent for about 10 million lines will be issued to Nokia shortly. This will give a boost to our mobile plans, which have of late been constrained because of capacity.
While these orders are primarily for 2G lines, we will be starting a 3G project as soon as the government releases spectrum. If the first phase of rollout goes well, the order will be placed with the existing vendors. The size of the deal would be around Rs 172 billion.
We have also charted huge plans on the CDMA front this year with capacity additions of 3.1 million lines planned. These are in the process of being rolled out. Our CDMA capacity as of date is 560,000, of which 360,000 are working connections. We are also planning to integrate our CDMA and GSM mobile billing, so that our customers can get better billing facility. This project is expected to be completed by March 2008.
The transmission network for supporting this huge expansion of our wireless network also needs to be upgraded. For that, we will be upgrading our IP/MPLS network to 10 gigabits. The national core backbone will have 40 channels of 10 gigabits, thereby making a huge capacity of 400 gigabits available on our regional network. We hope that with this network, we will witness a huge growth in subscriber base.
What new services have been launched by the company of late?
We have plans to launch a number of new services. We have recently launched IPTV services in Pune, Kolkata and Bangalore, and will be launching it in other cities shortly. IPTV offers a large number of benefits. For instance, users can watch cable TV or video of their choice, surf the net and talk on the phone simultaneously using a single telephone line.
We would like to launch a new valueadded service every month to arrest the declining ARPUs and service customers. While IPTV service is basically for landlines, we plan to soon launch money transfers for non-resident Indians.
Then there is a huge market for existing services like SMS and personalised ringback tones (RBTs). For instance, we have a current base of about 3 million for the personalised RBT service. We have recently started a service offering TV clips on mobiles on a trial basis in the north zone and we intend to take it to other parts of the country in the near future. We have also launched e-ticketing at GSM PCOs. Ultimately, the GSM PCO will become a one-stop shop for telecom and related services.
In addition, we will be launching a landline-to-mobile VPN, because people would like to have a VPN that covers their mobile and landline phones. We are also planning a regional VPN, roping in Delhi and Mumbai.
Where does BSNL stand vis-a-vis its competitors?
BSNL is a key player in the Indian telecom sector and has one of the largest networks in the country. Of the Rs 1,080 billion revenues of the Indian telecom sector, BSNL accounts for Rs 400 billion and 27 per cent of the total revenue. It has a market share of 30 per cent currently and intends to increase it to 33-34 per cent over the next few years.
What will be the company’s future thrust areas?
This year has been called the “Year of Broadband”. This is going to be a key thrust area for the company. We have big plans for expansion of broadband. Of the total 2.5 million broadband connections in the country, we have almost 1 million working connections, which accounts for 42 per cent share of the market. We are also amongst the leading ISPs in the country. While last year our broadband connections grew by 390,000, this year we are targeting 2 million additions. Our broadband connections cover almost 1,000 cities. So, approximately all the big cities have broadband connections in place.
We intend to increase our market share in the coming years. In the next one year, we have planned a capacity addition of 4 million lines in addition to our already existing 1.2 million capacity. Of this, roughly 2.6 million will be in the urban areas, thereby extending our reach to nearly 2,500 cities. We will also be covering 25,000 villages with broadband, and have planned for about 1.5 million lines in the rural areas.
What are the company’s rural initiatives?
Rural connectivity is another focus area for BSNL. We have planned 1,261 base transceiver stations (BTSs), of which 367 have already been commissioned. We intend to commission the remaining soon. We plan to roll out both broadband and mobile services in the rural areas for 23,000 villages. These will be connected on the broadband network through DSL ports, for which we have already ordered equipment for 1.5 million connections, to provide connectivity to 25,000 additional villages.
Moreover, we plan to provide wireless coverage for broadband in 1,000 rural blocks. No other operator is present in these blocks; BSNL wants to launch broadband services in these remote villages by providing wireless connectivity to 25,000 villages.
We intend to cover villages that have a population of 2,000 and above with GSmbased services. Similarly, we will provide umbrella coverage to most parts of the country by WLL signals. For instance, of the 8.8 million additional mobile lines planned for this year, 60 per cent will be in the rural areas, at least by my assessment. We hope that every individual in the rural areas will have access to a broadband and mobile connection, irrespective of where they are located.
What does the company intend to do about the poor quality of service on BSNL’s networks? Is the company addressing the issue of interconnection with private operators?
I do not think BSNL falls short of TRAI’s quality of service parameters. BSNL’s performance vis-? -vis other operators has been much better. At the same time, there is congestion in various places on the network. But this was primarily because our network expansion did not happen. Now that our expansion plans are under way, we will provide better service. The interconnection situation has improved and if there are any issues, we will take care of them. In fact, private operators themselves have been telling us that the situation is much better. TTSL’s CEO was saying that we have absolutely no problem on the points of interconnection (PoI) now. We are ensuring that the PoI requirements of private operators are met within one month.
The company’s profits have reportedly been deteriorating over the past few years. What is your view on this?
The revenue for the current year stands at Rs 400 billion, which is almost the same as last year. The profit after tax this year is expected to be close to Rs 78 billion, which is a little less than what it was last year, but operating profits are almost at the same level. We did not get a licence fee reimbursement of over Rs 5.42 billion, and this impacted our profits.
In the past year, we have not really grown at the pace we had hoped to achieve. Therefore, we have chalked out a systematic expansion plan for broadband, cellular and fixed line services which are slated to be rolled out shortly. We will now begin to assess the revenue generated.
What are the company’s investment plans for the next one year? How much has been invested so far?
Unfortunately, for the past year, we have not really been able to grow at the pace we had intended to. Now, with our mobile infrastructure orders placed and broadband expansion taking place, growth should pick up. So far, the capital expenditure has not been substantial, only about Rs 20 billion. But we intend to remedy this immediately. We plan to spend a total of about Rs 228 billion during 2007-08. Of this, Rs 30.69 billion will be invested in fixed and WLL, Rs 74.1 billion will be spent on mobile services, Rs 31.63 billion on broadband and internet services, and Rs 92.6 billion will be spent on other services. We are hoping for a 10 per cent increase in revenues this year.
What are the key concerns facing the telecom industry and BSNL in particular?
As far as BSNL is concerned, our profit has been falling over the last few years and our network was facing capacity constraints as our expansion plans had been delayed. In fact, we were able to add hardly any subscribers. But now we are moving forward on that front and intend to regain our second position by next year. Key among the concerns facing the industry are spectrum allocation for 3G, declining tariffs and high taxes and levies.
