State-owned Bharat Sanchar Nigam Ltd (BSNL)is in serious trouble. It has recorded the first ever loss since it was formed in October 2000. Since Kuldeep Goyal retired on 31 July, BSNL does not have a CMD now.But,that is nothing new for BSNL which has not been able to find a replacement to SD Saxena who retired as director finance in December 2008. That's a net 19 months without a CFO.
The government has just started the process to identify a CMD. Hopefully that process should not take as long. However, BSNL has company in MTNL, which too has an acting CMD.
As Goyal demitted office, he announced that BSNL has run up a loss of Rs 1,823 crore during 2009-'10 against a profit of Rs 575 crore in 2008-'09.During this fiscal, BSNL reported a 10.4 per cent decline in revenues at Rs 32,045.41 crore for 2009-10 as against Rs 35,812 crore in 2008-09.
The loss has been attributed to the fall in revenues from landline services and a higher wage bill due to the implementation of the Sixth Pay Commission for government employees. More importantly, it has not been able to compete in the ever-changing Indian telecom market.
As if that was not enough, it sought a refund of the payment made for 3G and BWA spectrum. That request was rejected by finance minister Pranab Mukherjee.
So will the government finally look to selling off a 26% stake in BSNL?
That could well be the best thing that could happen to BSNL. For that to happen, the government needs to convince the multitude of unions on the positives of selling the stake.
Sunday, August 1, 2010
Wednesday, July 7, 2010
BSNL's slowing growth
Suddenly communications minister A Raja is batting for state-owned telecom operators Bharat Sanchar Nigam Ltd.(BSNL)and Mahanagar Telephone Nigam Ltd (MTNL). Raja is seeking free 3G spectrum for both BSNL and MTNL. This after it was agreed that BSNL and MTNL which received the spectrum in 2008 would match the price arrived in the 3G auctions.
Why does this surprise the telecom industry?
Well, today BSNL is a shadow of what it was in May 2007 when A Raja was appointed as communications minister. At that time, BSNL had 31.6 million subscribers out of a total 177.8 million subscribers accounting for a subscriber market share of 17.76%. Then BSNL had marginally more subscribers than both Reliance Infocomm and Hutchison Essar (now Vodafone Essar). Today BSNL has 71.7 million subscribers and accounts for a market share of just 11.6%. It is number four after Bharti Airtel, Reliance Communications and Vodafone Essar. Ironically, the three private players seem to have retained their market share.
The slow growth in subscriber base was largely due to a shortage of capacity in the network. This happened primarily due to the policies followed by the communications ministry led by Raja. Soon after Raja became minister in May 2007, among the first things that he did was start re-negotiating the 45 million lines GSM tender of BSNL that was placed when Dayanidhi Maran was minister.
While Raja did manage to get a lowering in prices, the tender size was halved to 22.5 million. Then in April 2008, another tender of 93 million GSM lines was floated. This was the biggest order ever in the history of telecommunications. However, in 2010, a committee headed by Sam Pitroda, advisor to the Prime Minister has asked BSNL to scrap the tender.
So, it seems quite surprising that a man who literally rang the death knell for BSNL is now pleading with finance minister Pranab Mukherjee to give it a lease of life.Is there more than meets the eye? Or is there some truth in the rumours of an impending Cabinet reshuffle?
Why does this surprise the telecom industry?
Well, today BSNL is a shadow of what it was in May 2007 when A Raja was appointed as communications minister. At that time, BSNL had 31.6 million subscribers out of a total 177.8 million subscribers accounting for a subscriber market share of 17.76%. Then BSNL had marginally more subscribers than both Reliance Infocomm and Hutchison Essar (now Vodafone Essar). Today BSNL has 71.7 million subscribers and accounts for a market share of just 11.6%. It is number four after Bharti Airtel, Reliance Communications and Vodafone Essar. Ironically, the three private players seem to have retained their market share.
The slow growth in subscriber base was largely due to a shortage of capacity in the network. This happened primarily due to the policies followed by the communications ministry led by Raja. Soon after Raja became minister in May 2007, among the first things that he did was start re-negotiating the 45 million lines GSM tender of BSNL that was placed when Dayanidhi Maran was minister.
While Raja did manage to get a lowering in prices, the tender size was halved to 22.5 million. Then in April 2008, another tender of 93 million GSM lines was floated. This was the biggest order ever in the history of telecommunications. However, in 2010, a committee headed by Sam Pitroda, advisor to the Prime Minister has asked BSNL to scrap the tender.
So, it seems quite surprising that a man who literally rang the death knell for BSNL is now pleading with finance minister Pranab Mukherjee to give it a lease of life.Is there more than meets the eye? Or is there some truth in the rumours of an impending Cabinet reshuffle?
Saturday, June 12, 2010
Mukesh Ambani back in telecom; WiMAX is dead in India
It all happened in a few hours. Just before the FIFA World Cup started off in South Africa, there was sizzling hot action in the Indian telecom industry. On Day 16 of the bidding for broadband wireless access (BWA) spectrum, the auction ended in just one round.
That's when the surprises started to tumble out. Surprise 1: Infotel Broadband Services Private Limited, owned by Anant Nahata (son of Mahendra Nahata who has been running telecom equipment maker HFCL)won spectrum across India for Rs 12, 848 crore. The other winners included Aircel (8 circles), Tikona Digital Networks (5), Bharti Airtel and Qualcomm Inc (4 each)and Augere (1).
But, even before the ink had dried, came the second big surprise of the day. The $ 44.6 billion Reliance Industries Limited (RIL)owned by Mukesh Ambani in a media release announced that it had acquired a controlling 95% stake in Infotel for Rs 4,800 crore (US $ 1.03 billion)and that Infotel would be a subsidiary of RIL.The message was clear. It would focus on 4G and use TD LTE as the means of achieving that.
The not so surprising action came from younger brother Anil Ambani who welcomed the entry of Mukesh into telecom. Before most people could fathom what all this meant came the next big surprise. Mukesh is reported to have begun talks with Anil Ambani controlled Reliance Communications (RCom) for possible sharing of infrastructure.
So what does all this mean to the sector?
One, WiMAX as a technology is dead in India. The future will be TD LTE. Two, the level of competition will now extend to broadband. One can expect to see enterprise broadband rates come down over the next year. Three, it is very unlikely that RIL will restrict itself to 4G. It is likely to be present across the telecom eco-system, be it 2G/3G, enterprise services.One way out is to pick up a stake in RCom, which is looking for an infusion of cash. The other option is to pick up an existing player with a reasonable subscriber base.
One thing is for sure. Over the next 12 months, India will have just 6-7 large telecom operators. The game is simply over for the new players who managed to get licences and even start services in some circles over the last 12 months. What remains to be seen is how does the leader in telecom, Bharti Airtel react to this development. That could be an interesting play.
That's when the surprises started to tumble out. Surprise 1: Infotel Broadband Services Private Limited, owned by Anant Nahata (son of Mahendra Nahata who has been running telecom equipment maker HFCL)won spectrum across India for Rs 12, 848 crore. The other winners included Aircel (8 circles), Tikona Digital Networks (5), Bharti Airtel and Qualcomm Inc (4 each)and Augere (1).
But, even before the ink had dried, came the second big surprise of the day. The $ 44.6 billion Reliance Industries Limited (RIL)owned by Mukesh Ambani in a media release announced that it had acquired a controlling 95% stake in Infotel for Rs 4,800 crore (US $ 1.03 billion)and that Infotel would be a subsidiary of RIL.The message was clear. It would focus on 4G and use TD LTE as the means of achieving that.
The not so surprising action came from younger brother Anil Ambani who welcomed the entry of Mukesh into telecom. Before most people could fathom what all this meant came the next big surprise. Mukesh is reported to have begun talks with Anil Ambani controlled Reliance Communications (RCom) for possible sharing of infrastructure.
So what does all this mean to the sector?
One, WiMAX as a technology is dead in India. The future will be TD LTE. Two, the level of competition will now extend to broadband. One can expect to see enterprise broadband rates come down over the next year. Three, it is very unlikely that RIL will restrict itself to 4G. It is likely to be present across the telecom eco-system, be it 2G/3G, enterprise services.One way out is to pick up a stake in RCom, which is looking for an infusion of cash. The other option is to pick up an existing player with a reasonable subscriber base.
One thing is for sure. Over the next 12 months, India will have just 6-7 large telecom operators. The game is simply over for the new players who managed to get licences and even start services in some circles over the last 12 months. What remains to be seen is how does the leader in telecom, Bharti Airtel react to this development. That could be an interesting play.
Friday, June 4, 2010
Making 3G work
After what seemed like eternity, the 3G auctions are finally done and over with. Most importantly, the government has already received Rs 67,719 crore ($14.6 billion)from nine telecom service providers including state-owned Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL). The broadband wireless access (BWA) auctions have already generated bids of Rs 28,567 crore for three bands. So the government is assured of at least Rs 96,285 crore from telecom spectrum auctions.
Interestingly, none of the private operators has 3G spectrum across India. So there will be a spate of intra circle roaming deals. To do that, every private operator is looking to woo BSNL and MTNL which already have 3G spectrum across India. That could end up being a boon for both operators whose books are awash in red ink.
So what is likely to happen now? Once the spectrum is released in September, operators will work towards migrating their high ARPU subscribers to the 3G bands. That in turn will ease the pressure on the 2G spectrum. That will allow the operators to add on more subscribers on the 2G network. Most of this action will be in the top 20 cities.
The availability of 5 MHz of 3G spectrum will definitely ease the spectrum crunch of the incumbent operators for the time being. It is quite likely that the bulk of the post-paid subscriber base will opt for 3G services. Operators will soon try to monetize their investment in spectrum and rolling out 3G networks. One way out would be to provide spectrum to mobile virtual network operators (MVNOs) to launch services.
Thanks to the high bids for 3G spectrum, it is unlikely that any of the operators will go in for cut-throat pricing. The focus will be on services relating to Bollywood, cricket, astrology and religion. However, the biggest driver for 3G will be internet access. After all, millions of Indians will be in a position to surf the net, check e-mail etc for the first time. And they will do so on a mobile phone and not on a personal computer.
However, 5 MHz of 3G spectrum could be just too little in the not-too distant future. As subscribers opt for data services in a big way, the next round of spectrum crunch will be in data. Hope that the government is in a position to provide another 5 MHz to operators by then. Or else it would be one more service that does not provide value for money thanks to the bungling of the powers that control the telecom sector in India.
Interestingly, none of the private operators has 3G spectrum across India. So there will be a spate of intra circle roaming deals. To do that, every private operator is looking to woo BSNL and MTNL which already have 3G spectrum across India. That could end up being a boon for both operators whose books are awash in red ink.
So what is likely to happen now? Once the spectrum is released in September, operators will work towards migrating their high ARPU subscribers to the 3G bands. That in turn will ease the pressure on the 2G spectrum. That will allow the operators to add on more subscribers on the 2G network. Most of this action will be in the top 20 cities.
The availability of 5 MHz of 3G spectrum will definitely ease the spectrum crunch of the incumbent operators for the time being. It is quite likely that the bulk of the post-paid subscriber base will opt for 3G services. Operators will soon try to monetize their investment in spectrum and rolling out 3G networks. One way out would be to provide spectrum to mobile virtual network operators (MVNOs) to launch services.
Thanks to the high bids for 3G spectrum, it is unlikely that any of the operators will go in for cut-throat pricing. The focus will be on services relating to Bollywood, cricket, astrology and religion. However, the biggest driver for 3G will be internet access. After all, millions of Indians will be in a position to surf the net, check e-mail etc for the first time. And they will do so on a mobile phone and not on a personal computer.
However, 5 MHz of 3G spectrum could be just too little in the not-too distant future. As subscribers opt for data services in a big way, the next round of spectrum crunch will be in data. Hope that the government is in a position to provide another 5 MHz to operators by then. Or else it would be one more service that does not provide value for money thanks to the bungling of the powers that control the telecom sector in India.
Friday, January 2, 2009
2009 for India telecom
Telecommunications in India has not been hit by the global slowdown, yet. In the three month (September-November) period, the country added 30.84 million new mobile subscribers. That's over 10 million new additions every month. It seems unlikely that growth rates will drop substantially in the immediate future.
The big advantage is that while the big Indian telecom operators are mildly leveraged, there is a huge demand for connectivity across the country. Also, all the big operators including state-owned Bharat Sanchar Nigam Ltd (BSNL) are looking at sharing infrastructure. That will reduce their capex for now and opex in coming years.
So how will 2009 be?
A lot will depend on how the 3G auction fares, well, when it happens. In case the global operators are not present, it will be an opportunity for domestic operators to strengthen their position.
But competition is going to become more intense in 2G. Reliance Communications has already launched its GSM service. As of now it is unclear that there will be another price war quite like 2003 when Reliance launched its CDMA service. In such times, a price war could be just futile.
But there seem to be question marks over when other bidders will launch services? Datacom Solutions is in the process of resolving its ownership issues. Real estate major Unitech (which owns Unitech Telecom in collaboration with Norway's Telenor) is still trying to clear out its real estate dues. Swan Telecom is enmeshed in the dispute over BSNL providing it intra-circle roaming services. While most operators talked about launching services in mid-2009, as things stand, end-2009 would be a better bet.
However, this could just be the time for BSNL to get back into the reckoning. It's long delayed order of 23 million lines is being deployed now. That means it will have enough capacity to meet the needs of consumers in 2009. Plus, its 93 million line tender is being evaluated. it has launched IPTV services and is also expected to launch 3G services later this month.
So can we expect to see BSNL rising up the ranks in 2009?
It is also high time the government started lowering the levies and duties imposed on the sector. Unless that is done quickly, consumers should brace themselves for an increase in tariffs. But, that could end up slowing the Indian telecom growth story. It is not something that the government would want.
The big advantage is that while the big Indian telecom operators are mildly leveraged, there is a huge demand for connectivity across the country. Also, all the big operators including state-owned Bharat Sanchar Nigam Ltd (BSNL) are looking at sharing infrastructure. That will reduce their capex for now and opex in coming years.
So how will 2009 be?
A lot will depend on how the 3G auction fares, well, when it happens. In case the global operators are not present, it will be an opportunity for domestic operators to strengthen their position.
But competition is going to become more intense in 2G. Reliance Communications has already launched its GSM service. As of now it is unclear that there will be another price war quite like 2003 when Reliance launched its CDMA service. In such times, a price war could be just futile.
But there seem to be question marks over when other bidders will launch services? Datacom Solutions is in the process of resolving its ownership issues. Real estate major Unitech (which owns Unitech Telecom in collaboration with Norway's Telenor) is still trying to clear out its real estate dues. Swan Telecom is enmeshed in the dispute over BSNL providing it intra-circle roaming services. While most operators talked about launching services in mid-2009, as things stand, end-2009 would be a better bet.
However, this could just be the time for BSNL to get back into the reckoning. It's long delayed order of 23 million lines is being deployed now. That means it will have enough capacity to meet the needs of consumers in 2009. Plus, its 93 million line tender is being evaluated. it has launched IPTV services and is also expected to launch 3G services later this month.
So can we expect to see BSNL rising up the ranks in 2009?
It is also high time the government started lowering the levies and duties imposed on the sector. Unless that is done quickly, consumers should brace themselves for an increase in tariffs. But, that could end up slowing the Indian telecom growth story. It is not something that the government would want.
3G auction: Delayed further
This is supposed to be the year of 3G in India. Well MTNL has started on a limited basis and BSNL should be there soon. But, the 3G auction seems to be stuck in a maze. As things stand there are serious doubts whether the auction will take place before the coming elections.
First, there were no real global telecom operators at the pre-bid conference last month. Then the Department of Telecommunications (DoT) decided to postpone the auctions by 15 days. Now, the finance ministry wants the base price for the 3G auctions to be doubled from the earlier Rs 2,020 crore to Rs 4,040 crore ($ 824 million). It also wants the base price for broadband wireless access (BWA) to be doubled from Rs 1,010 crore to Rs 2,020 crore.
What these moves mean is that it is unlikely that the process for 3G auctions will start before the elections. This also runs counter to the claims of communications and information technology minister A Raja's claims that the auction will happen in January 2009.
Of course it is well known that a couple of telecom operators are not too keen for the acutions to happen now. So,well wait and watch till the action starts.
First, there were no real global telecom operators at the pre-bid conference last month. Then the Department of Telecommunications (DoT) decided to postpone the auctions by 15 days. Now, the finance ministry wants the base price for the 3G auctions to be doubled from the earlier Rs 2,020 crore to Rs 4,040 crore ($ 824 million). It also wants the base price for broadband wireless access (BWA) to be doubled from Rs 1,010 crore to Rs 2,020 crore.
What these moves mean is that it is unlikely that the process for 3G auctions will start before the elections. This also runs counter to the claims of communications and information technology minister A Raja's claims that the auction will happen in January 2009.
Of course it is well known that a couple of telecom operators are not too keen for the acutions to happen now. So,well wait and watch till the action starts.
Friday, December 12, 2008
A 3G nation...finally
So after years of debate, India is on the world 3G map. So what if it means that only high-end subscribers of state-owned Mahanagar Telephone Nigam Ltd (MTNL) in limited areas of Delhi have access to the service for now. Well, the Jadoo has begun.
Bharat Sanchar Nigam Ltd (BSNL) which was also provided spectrum with MTNL will officially launch services in Chennai hopefully on 14 January 2009. That also happens to be Pongal, the Tamil harvest festival. Initially subscribers are being offered video telephony and later mobile television. However, the big hope is that gaming will become a big driver for 3G in the coming months.
Auction of 3G spectrum
While MTNL and BSNL launch 3G services, private telecom operators are waiting to get into the act. That wait should end on 16 January when the for 3G spectrum starts. In 15 of the 22 telecom circles in India, private operators can bid for four blocks of spectrum of 2X5MHz. There is no spectrum available as of now in Rajasthan and the North-East. In Delhi and Gujarat private operators can bid for just two blocks of spectrum each, while there is just one block available in West Bengal. Once the 3G auctions are over, the bidding for BWA (broadband wireless access) auctions will begin.
The two-stage auction will be done over the internet. The Clock stagewill establish the bidders in each of the circles. It will consist of many rounds. This will happen simultaneously for all the 22 circles. It will stop once demand for lots in the service area is less than or equal to the available supply. This will be followed by an Assignment Stage. This will be a single round in which the winning bidders can bid for specific frequencies. However, the winning bidders need not participate in this round unless they are looking for a specific band to operate in.
All that is fine. But in the current state of the world market, how high the bids go remain to be seen. Over the next couple of years, the focus of the operators would be on subscribers in the Top 2o cities. That could mean that the battle for the Delhi spectrum could be long-drawn. After all, only two slots are available. But, expect moderate bidding in other circles. After all, in a low ARPU country, it is debatable how many subscribers will opt for 3G services.
A lot of that will become clear over the next five weeks. But, I see this as the opening for large global operators to get their foothold into India.
Bharat Sanchar Nigam Ltd (BSNL) which was also provided spectrum with MTNL will officially launch services in Chennai hopefully on 14 January 2009. That also happens to be Pongal, the Tamil harvest festival. Initially subscribers are being offered video telephony and later mobile television. However, the big hope is that gaming will become a big driver for 3G in the coming months.
Auction of 3G spectrum
While MTNL and BSNL launch 3G services, private telecom operators are waiting to get into the act. That wait should end on 16 January when the for 3G spectrum starts. In 15 of the 22 telecom circles in India, private operators can bid for four blocks of spectrum of 2X5MHz. There is no spectrum available as of now in Rajasthan and the North-East. In Delhi and Gujarat private operators can bid for just two blocks of spectrum each, while there is just one block available in West Bengal. Once the 3G auctions are over, the bidding for BWA (broadband wireless access) auctions will begin.
The two-stage auction will be done over the internet. The Clock stagewill establish the bidders in each of the circles. It will consist of many rounds. This will happen simultaneously for all the 22 circles. It will stop once demand for lots in the service area is less than or equal to the available supply. This will be followed by an Assignment Stage. This will be a single round in which the winning bidders can bid for specific frequencies. However, the winning bidders need not participate in this round unless they are looking for a specific band to operate in.
All that is fine. But in the current state of the world market, how high the bids go remain to be seen. Over the next couple of years, the focus of the operators would be on subscribers in the Top 2o cities. That could mean that the battle for the Delhi spectrum could be long-drawn. After all, only two slots are available. But, expect moderate bidding in other circles. After all, in a low ARPU country, it is debatable how many subscribers will opt for 3G services.
A lot of that will become clear over the next five weeks. But, I see this as the opening for large global operators to get their foothold into India.
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