TELECOM INDUSTRY PUBLIC SECTOR by JOHN DAS

BSNL
BHARAT SANCHAR NIGAM LIMITED


Submitted to:
Jayamohan Nair





Submitted by:
JOHN DAS
ICM-IMK


1 Introduction
2 BSNL
3 Relevance to economy
4 Major players
5 Industry environment
6 Industry structure
7 Industry attractiveness
8 Present and future
9 Conclusion



INTRODUCTION

Telecom industry in India has undergone a revolution in the recent years. The country is ranked third worldwide in terms of having the largest telecommunication network, after China and USA . With the ongoing investments into infrastructure deployment, the country is projected to become the second largest telecom market globally in next few years.

According to new analytical study on the sector "Indian Telecom Analysis (2008-2012)", mobile telephony, in particular, continues to fuel growth of the Indian telecom sector, with mobile subscribers projected to grow at a CAGR of around 15% between 2009-10 and 2013-14. Other segments of the industry such as Internet and broadband are also anticipated to witness huge growth rates in terms of both subscriber addition and network infrastructure deployment over the forecasted period.

The launch of advance telecom services like 3G and IPTV will also drive the growth in Indian telecom subscriber base over the forecasted period. Furthermore, mobile handset market also expected to register a robust growth in near future.
In this paper we mainly focus on the telecom industry (public sector) and analyses the various factors affecting the industry.



BSNL
Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India: Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five years it has become one of the largest public sector unit in India.

BSNL has installed Quality Telecom Network in the country and now focusing on improving it, expanding the network, introducing new telecom services with ICT applications in villages and wining customer's confidence. Today, it has about 47.3 million line basic telephone capacity, 4 million WLL capacity, 20.1 Million GSM Capacity, more than 37382 fixed exchanges, 18000 BTS, 287 Satellite Stations, 480196 Rkm of OFC Cable, 63730 Rkm of Microwave Network connecting 602 Districts, 7330 cities/towns and 5.5 Lakhs villages.

BSNL is the only service provider, making focused efforts and planned initiatives to bridge the Rural-Urban Digital Divide ICT sector. In fact there is no telecom operator in the country to beat its reach with its wide network giving services in every nook & corner of country and operates across India except Delhi & Mumbai. Whether it is inaccessible areas of Siachen glacier and North-eastern region of the country. BSNL serves its customers with its wide bouquet of telecom services.

BSNL is numero uno operator of India in all services in its license area. The company offers vide ranging & most transparent tariff schemes designed to suite every customer.
BSNL cellular service, CellOne, has more than 17.8 million cellular customers, garnering 24 percent of all mobile users as its subscribers. That means that almost every fourth mobile user in the country has a BSNL connection. In basic services, BSNL is miles ahead of its rivals, with 35.1 million Basic Phone subscribers i.e. 85 per cent share of the subscriber base and 92 percent share in revenue terms.

BSNL has more than 2.5 million WLL subscribers and 2.5 million Internet Customers who access Internet through various modes viz. Dial-up, Leased Line, DIAS, Account Less Internet(CLI). BSNL has been adjudged as the NUMBER ONE ISP in the country.

BSNL has set up a world class multi-gigabit, multi-protocol convergent IP infrastructure that provides convergent services like voice, data and video through the same Backbone and Broadband Access Network. At present there are 0.6 million DataOne broadband customers.
The company has vast experience in Planning, Installation, network integration and Maintenance of Switching & Transmission Networks and also has a world class ISO 9000 certified Telecom Training Institute.
Relevance to Economy
The present turnover of BSNL is more than Rs.351,820 million (US $ 8 billion) with net profit to the tune of Rs.99,390 million (US $ 2.26 billion) for last financial year. The infrastructure asset on telephone alone is worth about Rs.630,000 million (US $ 14.37 billion).

BSNL plans to expand its customer base from present 47 millions lines to 125 million lines by December 2007 and infrastructure investment plan to the tune of Rs. 733 crores (US$ 16.67 million) in the next three years.

The turnover, nationwide coverage, reach, comprehensive range of telecom services and the desire to excel has made BSNL the No.1TelecomCompanyof India.


Bharat Sanchar Nigam Limited has got net fixed assets valuing more than Rs. 54698 Crores (US $ 13.67 billion), which are in the form of Land, Buildings Cables, Apparatus & Plants etc. as on 31.03.2008.
Major players
India’s telecom sector has shown massive upsurge in the recent years in all respects of industrial growth. From the status of state monopoly with very limited growth, it has grown in to the level of an industry. Telephone, whether fixed landline or mobile, is an essential necessity for the people of India. This changing phase was possible with the economic development that followed the process of structuring the economy in the capitalistic pattern. Removal of restrictions on foreign capital investment and industrial de-licensing resulted in fast growth of this sector. At present the country's telecom industry has achieved a growth rate of 14 per cent. Till 2000, though cellular phone companies were present, fixed landlines were popular in most parts of the country.
With government of India setting up the Telecom Regulatory Authority of India, and measures to allow new players country, the featured products in the segment came in to prominence. Today the industry offers services such as fixed landlines, WLL, GSM mobiles, CDMA and IP services to customers. Increasing competition among players allowed the prices drastically down by making the mobile facility accessible to the urban middle class population, and to a great extend in the rural areas. Even for small shopkeepers and factory workers a phone connection is not an unreachable luxury. Major players in the sector are BSNL, MTNL, Bharti Teleservices, Hutchisson Essar, BPL, Tata, Idea, etc. With the growth of telecom services, telecom equipment and accessories manufacturing has also grown in a big way.


Industry environment
Liberalization
The process of liberalization in the country began in the right earnest with the announcement of the New Economic Policy in July 1991. Telecom equipment manufacturing was delicensed in 1991 and value added services were declared open to the private sector in 1992, following which radio paging, cellular mobile and other value added services were opened gradually to the private sector. This has resulted in large number of manufacturing units been set up in the country. As a result most of the equipment used in telecom area is being manufactured within the country. A major breakthrough was the clear enunciation of the government’s intention of liberalizing the telecom sector in the National Telecom Policy resolution of 13th May 1994.
The Indian Telecommunications network with 430 million connections (as on March 2009) is the third largest in the world. The sector is growing at a speed of 46-50% during the recent years. This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. Presently, all the telecom services have been opened for private participation. The Government has taken following main initiatives for the growth of the Telecom Sector:




Industry Structure
Chapter 1: Telecom Industry Overview
Telecom & ICT Quick Facts
Communications in India 1882-2003
Entertainment & Communication Gadgets in India 1959-2006
Calling rules in India (tariff structure)
One India Tariff Structure
Ministry and Regulating Bodies
FDI in Telecom Sector
Rural Telephony
Long Distance Calling
Teledensity in India
Mobile Subscriber Status
Mobile Call Tariffs
India-Connectivity by Technology (GSM, CDMA, Broadband, Fixed)
Wireless Teledensity in four metros (GSM)
Wireless Teledensity in four metros (CDMA)
Wireless Teledensity in India in Four metros (GSM+CDMA)
Postpaid vs. Prepaid

Chapter 2: GSM Segment
GSM Operators in India
Who Operates Where (Operator License Areas)
GSM Subscriber Growth
State wise GSM Population
Falling Tariffs and Rising Subscribers
Subscriber Growth and Falling Tariffs
GSM Subscriber number in four metropolitan cities
Foreign investors in GSM segment
M&A Activity in GSM Segment
GSM Operators-Subscriber Numbers
GSM Operators- Market Shares
Postpaid vs. Prepaid in GSM
Operator ARPU-GSM
ARPU-Postpaid vs. Prepaid
Operator Revenue Breakup
Minutes of Usage
Operator Snapshots
Bharti (Airtel)
Hutch
MTNL
Idea
BSNL
Spice
Reliance
Aircel

Chapter 3: CDMA Operators in India
CDMA Operators
Who Operates Where - (Operator License Areas)
CDMA in India (Start, standard, service classification)
CDMA Mobile Subscribers
CDMA Operator Market Shares
CDMA vs. GSM in Four Metros
Postpaid vs. Prepaid in CDMA
Operator ARPU
Minutes of Usage
CDMA Growth Drivers
Operator Snapshots
Reliance
Tata
BSNL
MTNL
HFCL

Chapter 4: Fixed Line Operators
Fixed Line Operators
Who Operates Where - (Operator License Areas)
Fixed Line Subscriber Numbers
CDMA Wireless Fixed Subscriber Numbers
Operator Market Shares
Fixed Line Segment - Challenges
Fixed Line - Survival Strategies

Chapter 5: Internet & Broadband
Internet Segment Snapshot
Market Share by Access Modes
Point of Access
Subscriber Access Contexts
Broadband Networks- Home Usage
Broadband Networks-Commercial Usage
Mobile Internet
IPTV in India
Internet: Challenges and Opportunities

Chapter 6: Handset Market
Handset Brands in India
Handset Market Snapshot
Handset Market by Features
Consumer Buying Behavior - Prices
What consumers look for in Handsets?
Handset Market Shares (Overall)
GSM Handset Market Shares
CDMA Handset Market Shares
Handset Users by Age Group
How Handsets are sold in India
Blackberry in India
Handset Market Growth Drivers
Windows Mobile & Palm
Handset Manufacturing (Indian Players)
Handset Manufacturing (Global Players)
Component Sourcing & Manufacturing in India
Location Analysis for Manufacturing Operations
EMS in India
Growth Drivers for EMS in India

Chapter 7: Content & Value Added Services
Indian Media Market (TV Channels)
Indian Media Market (Print Media)
Voice vs. Data Traffic
Data Traffic: Components and their Market Shares
Content-What is available in India
Content Market Players
Content Download Channels
Indian Movie and Local Content
Movie based Content Value Chain
Content Rights & Distribution
Ringtones and Music Downloads
Content Pricing Structure
Content Downloads and Handset Compatibility
MMS in India
SMS Market
SMS Short Codes
Value Added Services-What is available
VAS Awareness among People
Content and VAS offered by Various Operators (GSM+CDMA)
Non Operator Content Portals
Billing Integration with Operators
Billing Integration Service Providers in India (Snapshots)
Billing Integration Explained
Blogs in India

Chapter 8: Mobile Gaming
Mobile Gaming: Overview and Market Potential
Mobile Games Development Strategies
JAVA & BREW in India
Game Developers in India

Chapter 9: Mobile Networks
Type of Wireless Networks & Standards in India
Market Snapshot
Market Potential
Network Vendors and their Key Accounts
Networks Vendors Market Shares
New Tenders in Mobile Networks (2006)
Network Rollouts - Turnkey Rollouts
Network Rollouts - Non Turnkey Rollouts
Network Rollouts - What does it mean in practice?
Network Cell Sites-Types
Cell Sites-Shelters
Cell Sites-Indoor Sites
Cell Sites-Outdoor Cabinets
Shelter Manufacturers
Outdoor Solution Providers
RF & Co-Axial Cables
Network QoS (Quality of Service)
Vendors Snapshots
Ericsson
Nokia
Lucent
Motorola
Huawei
ZTE
Nortel
Siemens
Alcatel
Network Rollout Services
Backbone Networks & Providers



Chapter 10: 3G in India
3G & Beyond in India
3G Launch How and When
3G in India - Feasibility Analysis
Challenges for Operators
Content and VAS in 3G

Chapter 11: WiFi, WiMAX & VoIP
Wi-Fi in India
Wi-Fi Equipment Market
WiMAX in India
Why WiMAX is good for India
WiMAX Complications
VoIP in India
Messenger Services vs. VoIP

Chapter 12: Prospective Business Cases & Opportunity Mapping
New Business Case: Content Segment
New Business Case: 3G VAS and Content
New Business Case: WiFi
New Business Case: WiMAX
New Business Case: Mobile Networks
New Business Case: Mobile Gaming
Opportunity Mapping
Content Segment
WiFi.

Industry attractiveness
Telecom major Bharti Airtel posted a 22.2 percent increase in net profit for the first quarter of 2009-10 at Rs.2,647.95 crore (Rs.26.48 billion / $547 million).
The company’s total income during the period under review rose 22 percent to Rs.10,448.69 crore from Rs.8,567.8 crore in the same period a year ago, it said in a regulatory statement.
The increase in profits was also because of a Rs.250 crore gain as pay-outs on its foreign currency loans fell due to rupee appreciation.
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BSNL is in hardship, with net profit for FY09 falling 96.5% to Rs. 1.04 billion and revenues showing an 8.1% drop in revenues to Rs. 349.37 billion compared to last fiscal. Profits dropped due to higher staff costs, WSJ reported. Over the past four years, BSNL has suffered a plummet in net profits, from Rs. 89.39 billion in 2005-06 to Rs. 30.09 billion in 2007-08.
The equity sale could bring in much needed cash and the IPO would be the first step in privatising and improving efficiencies at BSNL.
Landlines Surrendered, Rev Down 20.65%
Revenues from wireline segment fell 20.65% to Rs. 11.5 billion in 2008-09. The company has been struggling with the problem of landlines being surrendered for years now, with increasing popularity of mobiles, competition and its own service levels falling below customer expectations. In the past three years, 6.3 million landlines have been surrendered and this year notches 342,000 already, Business Standard reports.
Restructuring Measures To Tackle Downfall
BSNL has hired market research body IMRB to study and offer solutions to check its plummeting landline subscriptions, and Boston Consulting Group to advice it on boosting sales revenues. BCG has suggested the company divide into separate marketing, sales and customercare divisions. Last year, MTNL and BSNL announced a list of measures to retain landline connections. The measures outlined: increasing of the broadband network and introducing Value Added Services like Voice over IP (VOIP), Games on Demand, IPTV, SMS etc for promoting the land line services. The other, more generic, involved introducing alternate tariff plans, though it is already providing landline services below cost. We wonder why it hasn’t occurred to BSNL to consider improving its customer service?
BSNL plans to share towers and passive infrastructure such as the country-wide optical fibre backbone it owns with other telcos and ISPs to improve revenues. Apart from this, Business Standard reports that BSNL has also sought exemption from paying license fees citing a clause in the telecom policy which does not require state owned telcos to do so. It has been paying Rs. 30 billion per year as telecom license fees.
The company recently partnered with NTT DoCoMo to offer enterprise solutions. It plans to do so with other international companies such as Cable & Wireless, British Telecom and PCCW Hong Kong.
On the 3G Front
Observing a feeble response to 3G by Indian cellphone users, BSNL decided to take MTNL’s route and tie up with private operators to run 3G services for the next 10 years on a revenue sharing basis, Economic Times reports. We found MTNLs tender to be rather unattractive for applicants, given the special conditions involved, but if you add BSNL to the mix, and offer a company a pan India base, it just might work as bait; there’s no tender from BSNL yet, though.

Challenges
During the financial year 2006-2007 (from April 1, 2006 to March 31, 2007) BSNL has added 9.6 million new customers in various telephone services taking its customer base to 64.8 million. BSNL's nearest competitor Bharti Airtel is standing at a customer base of 39 million. However, despite impressive growth shown by BSNL in recent times, the Fixed line customer base of BSNL is declining. In order to woo back its fixed-line customers BSNL has brought down long distance calling rate under OneIndia plan, however, the success of the scheme is not known. However, BSNL faces bleak fiscal 2006-2007 as users flee, which has been accepted by the CMD BSNL.
Presently there is an intense competition in Indian Telecom sector and various Telcos are rolling out attractive schemes and are providing good customer services.
Access Deficit Charges (ADC, a levy being paid by the private operators to BSNL for provide service in non-lucrative areas especially rural areas) has been slashed by 37% by TRAI, w.e.f. April 1, 2007. The reduction in ADC may hit the bottomlines of BSNL.
BSNL launched 3G services in 11 cities of country in 2nd march 2009.MTNL which operates in Mumbai and Delhi first launched 3G services in these cities.




Present and future
BSNL (then known as Department of Telecom) had been a near monopoly during the socialist period of the Indian economy. During this period, BSNL was the only telecom service provider in the country (MTNL was present only in Mumbai and New Delhi ). During this period BSNL operated as a typical state-run organization, inefficient, slow, bureaucratic, and heavily uinionised. As a result subscribers had to wait for as long as five years to get a telephone connection. The corporation tasted competition for the first time after the liberalisation of Indian economy in 1991. Faced with stiff competition from the private telecom service providers, BSNL has subsequently tried to increase efficiencies itself. DoT veterans, however, put the onus for the sorry state of affairs on the Government policies, where in all state-owned service providers were required to function as mediums for achieving egalitarian growth across all segments of the society. The corporation (then DoT), however, failed miserably to achieve this and India languished among the most poorly connected countries in the world. BSNL was born in 2000 after the corporatisation of DoT. The efficiency of the company has since improved. However, the performance level is nowhere near the private players. The corporation remains heavily unionised and is comparatively slow in decision making and implementation. Though it offers services at lowest tariffs, the private players continue to notch up better numbers in all areas, years after year. BSNL has been providing connections in both urban and rural areas. Pre-activated Mobile connections are available at many places across India. BSNL has also unveiled cost-effective broadband internet access plans (DataOne) targeted at homes and small businesses. At present BSNL enjoy's around 60% of market share of ISP services.
Year of Broadband 2007
2007 has been declared as "Year of Broadband" in India and BSNL is in the process of providing 5 million Broadband connectivity by the end of 2007. BSNL has upgraded existing Dataone (Broadband) connections for a speed of up to 2 Mbit/s without any extra cost. This 2 Mbit/s broadband service is being provided by BSNL at a cost of just US$ 11.7 per month (as of 21/07/2008 and at a limit of 2.5GB monthly limit with 0200-0800 hrs as no charge period). Further, BSNL is rolling out new broadband services such as triple play.
BSNL is planning to increase its customer base to 108 million customers by 2010. With the frantic activity in the communication sector in India, the target appears achievable.
BSNL is a pioneer of rural telephony in India. BSNL has recently bagged 80% of US$ 580 m (INR 2,500 crores) Rural Telephony project of Government of India.
On the 20th of March, 2009, BSNL advertised the launch of BlackBerry services across its Telecom circles in India. The corporation has also launched 3G services in select cities across the country. Presently, BSNL and MTNL are the only players to provide 3G services, as the Government is still in the process of auctioning the 3G spectrum to private players.

Conclusion

In this world of tough competition bsnl is struggling to keep up with needs of the society in the areas of service. The level of professionalism is also lacking. So if they are to survive they have to adapt quickly to changing needs, because the rival firms including the private and foreign players are quickly gaining acceptance among the public.