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.
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