After several years of struggling to hold its own in the face of growing competition and changing industry dynamics, India’s state-run telecom giant Bharat Sanchar Nigam Limited (BSNL) is finally exhibiting strong signs of revival. The turning point came when BSNL, after being in the red for several years, posted an operating profit of Rs 6.72 billion in 2014-15. Although modest when compared to the whopping Rs 400 billion pile of debt on its books, it set the tone for a potential financial turnaround in the long term. In fact, in a presentation to telecom minister Manoj Sinha, BSNL stated that it expects to report a three fold jump in operating profits during 2015-16 and reduce its net loss by half vis-à-vis 2014-15.
The losses are likely to be further trimmed, as BSNL focuses on bringing down the biggest expenditure item on its books – employee costs. Around 50 per cent of BSNL’s top line goes towards paying salaries and pensions. The PSU spent Rs 150 billion, or 52 per cent of its revenues, in wages to over 200,000 employees in 2014-15. In contrast, private telecom companies spend only about 7-8 per cent of their revenues on employees and are thus left with enough funds to invest in expansion.
In this scenario, the telecom ministry’s suggestion to implement a performance-related pay model at a recent conference of BSNL’s heads of circles, is apt. This is likely to enforce a work culture that focuses on higher efficiency and is devoid of the PSU DNA that has so far constrained BSNL’s functioning. During the meeting, the telecom minister was quoted as saying that letting go of people who are responsible for the negative growth of the company could help BSNL improve. He went on to suggest that BSNL should set a target to achieve a 15 per cent market share, up from the current 10.4 per cent. “With dedicated staff, which is bigger than that of any other company, the target has to be ambitious,” he noted.
During the past two years, BSNL has been persistent in its efforts to improve its operational efficiency and usher in financial growth. Expansion plans have been drawn up to strengthen the company’s mobile network, several attractive initiatives are being launched to revive its fading wireline business, and new and innovative data-oriented offers are being introduced to bring more customers on board. Data, in fact, is being seen as the biggest building block of the operator’s new growth strategy. It will also catapult it back into the competition after having conceded market share to private sector rivals for many years.
Between April 1, 2015 and May 31, 2016, BSNL added nearly 12 million net mobile customers across India. The bulk
of these acquisitions took place during February-May 2016, when BSNL beat the industry average by adding nearly 2 million wireless connections each month. The operator’s move, announced in end-2015, to offer free incoming calls to roaming customers across India has been a bold one. While it has eroded revenues by about Rs 1.5 billion, it has also resulted in a nearly threefold jump in monthly subscriber additions, thus more than compensating for the revenue loss.
BSNL chose to stay away from the recently concluded spectrum auction. While the decision was largely driven by its fragile financial condition, it helped the company focus on revamping its business strategies even as its private peers were busy chalking out plans for acquiring spectrum.
Meanwhile, the entry of Reliance Jio Infocomm Limited (RJIL) has infused new vigour into the industry and, surprisingly enough, BSNL is all set to take the company head on. Having missed the voice bus, it is clear about carving a mark for itself in the data space. The company has launched a string of data plans at compelling price points to retain its existing customers and acquire new ones.
How is BSNL addressing its legacy issues? How it is dealing with bureaucratic interference? And what are its plans to make up for the missed opportunities? tele.net takes a look.…
Investments and network expansion: BSNL has earmarked Rs 40 billion for its own projects in 2016-17 and another Rs 30 billion for government-funded projects. For the internal projects, it has already invested Rs 15 billion during the first half of 2016-17, and plans to invest the remaining Rs 25 billion by March 2017. The majority of these funds will be dedicated towards expanding the company’s Wi-Fi footprint, enhancing the core network and strengthening its mobile tower portfolio. In the last two years, it has installed 26,000 base transceiver stations (BTSs) and it plans to add another 20,000 BTSs by the end of 2016-17 at an investment of Rs 20 billion. The installation of new mobile towers in states like Andhra Pradesh, Bihar, Madhya Pradesh, Maharashtra, Odisha, Uttar Pradesh, West Bengal, Chhattisgarh, Jharkhand and Telangana, including in some Left-Wing Extremist-affected areas, is also on the cards.
Data drives growth: Undoubtedly, data will be at the forefront of the next wave of growth in the telecom market. India already has over 350 million internet users and this figure is expected to double by 2020. To capture a share of this burgeoning market, BSNL has come up with a host of interesting offers. Its scheme offering unlimited 3G access at Rs 1,099 per month has been successful in building demand for mobile data. As a result, data usage on BSNL’s network has grown fourfold, from around 80 TB in 2012 to about 353 TB recently.
Earlier, an app-based calling service was launched to allow customers to use fixed line broadband services through their mobile phones when on the move and even when abroad. However, owing to objections from industry players, BSNL is now working on a watered-down version of the app, wherein the service will be applicable within the home premises only. Only those subscribers who have a BSNL fixed broadband as well as mobile connection are eligible for the scheme. The plan, which combines broadband and mobile connectivity for free voice calls, will compete strongly with RJIL’s Rs 149 plan.
BSNL has recently announced its plans to double its mobile broadband capacity to 600 TB in the southern zone and to up to 450 TB in other zones.
Wi-Fi to play a key role: Since BSNL has limited 4G spectrum holdings, it has turned to Wi-Fi as an alternative to provide high speed services to its customers. The company currently has around 2,700 hotspots across the country and plans to take this number to 40,000 by March 2018. It is exploring both capex and opex models for Wi-Fi deployment. While in the former, hotspots will be owned and managed by BSNL, in the latter, Wi-Fi hotspots would be created by franchisees, who will install, manage and run the sites for a five-year period. BSNL, along with MTNL, has also signed a deal with the tourism ministry to equip 100 tourist destinations with high speed Wi-Fi by creating public Wi-Fi hotspots. The agreement will be valid for seven years, with the tourism ministry bearing the operational costs for the first three years.
Revamping the legacy wireline business: The first phase of replacing BSNL’s legacy wireline exchanges with next-generation network (NGN) switches is complete. Under this, BSNL has added 1 million lines across 672 exchanges. The second phase, which will cover exchanges in urban areas, is in progress. The process involves the upgradation of landline exchanges to IP-based NGN across India, and enables facilities such as video and conference calls.
Monetising its assets: After resisting the idea of opening up its infrastructure for sharing, BSNL has finally taken some concrete steps towards forming partnerships with private operators to monetise its underutilised spectrum assets. In mid-2016, the operator was in advanced talks with RJIL and Vodafone for signing a 2G roaming agreement, which could help the private operators in plugging connectivity gaps in their networks. Recently, it signed a spectrum sharing deal with a private operator in the Gujarat circle, which is expected to bring in revenues of Rs 15 billion over a period of five years. The company has also floated an expression of interest for launching 4G services in the 2500 MHz band through a revenue-sharing model. In fact, BSNL is targeting an annual revenue of Rs 20 billion from spectrum sharing, starting 2017-18.
Tower sharing is another key opportunity that will help BSNL make more money. Of the 65,000 towers that it has across India (excluding in Delhi and Mumbai), BSNL shares only around 8,000 towers with private companies, generating an annual revenue of Rs 2.5 billion. The company now aims to take this up to Rs 3 billion–Rs 4 billion per year.
BSNL has also issued notices inviting companies to set up a virtual network enabler (VNE) platform. The process is expected to be completed by end-2016. Post this, virtual network operators (VNOs), who have shown interest in partnering with BSNL, will be able to start providing services. VNE will serve as a plug-and-play platform for VNOs, enabling them to connect with BSNL’s network without any major investment in equipment.
Conclusion
Given BSNL’s not-so-successful revival attempts in the past, there is some amount of scepticism among industry
observers regarding a full-fledged turnaround. The company’s mounting losses remain a grey area with no light visible at the end of the tunnel. According to the Public Enterprises Survey of 2014-15, BSNL recorded the highest losses among the 77 public sector units surveyed, with its net loss accounting for almost a third of the total losses incurred during that year, at Rs 82.34 billion (this translates into a net loss of over Rs 220 million each day). Operational profits will do little to shrink this pile of losses. Also, the decline in landline connections has continued despite schemes like free night-time calling and low tariffs. In the data segment too, the play around tariffs will only give a temporary push to operational growth, with service quality being the key to long-term sustainability.
That said, the company is well-aware of the compelling need for an overhaul, especially with the telecom industry witnessing a transformation in terms of growth drivers, business dynamics and increased competition. In its favour, moreover, it has a strong infrastructure backbone, which it can leverage to turn around its situation. The company enjoys a ubiquitous reach across the country with deep inroads in the rural areas. It owns an extensive network of telecom towers, fibre and bandwidth resources. It holds about 20 per cent share of spectrum in any given circle on average, which is significantly more than that held by most private operators. BSNL also controls a sizeable share of the wireless market and has a near monopoly in the landline business.
While it would be too optimistic to expect the telecom behemoth to achieve a quick transformation, the activity witnessed in the past 8-12 months indicates a growing agility in the company. Having seen a marginal improvement in its revenues and recording operational profits for the past two consecutive years, BSNL claims it is getting back on track. It is ready to take on its private peers as it enhances its focus on data services and customer acquisition. Timely completion of the BharatNet project will also be key in re-establishing BSNL’s credibility in the industry and helping India achieve its digital vision.
Given the right impetus, the company could well regain its lost glory and emerge as a player to contend within the market.
Akanksha Mahajan Marwah
