Project Report on Bharat Sanchar Nigam Ltd (BSNL)-Strategic and Financial Analysis of Telecom Company in India
Dissertation and Research Proposal on Telecommunications Industry in India-BSNL-
Bharat Sanchar Nigam LtdCase Study on Telecommunication Industry in India-BSNL-
Bharat Sanchar Nigam LtdSWOT Analysis of Bharat Sanchar Nigam Ltd-BSNL
Strengths
- Integrated telecoms operator offering fixed-line (local and DLD/ ILD), fixed-wireless, mobile and broadband services
- Leading local fixed operator, with more than 65% market share and about 78mn mobile subscribers (September 2010) in a fast-growing market. India's fourth largest GSM operator
- For the financial year ended March 2010, BSNL reported a net loss of INR18.227bn, a significant change of the net profits of INR5.749bn and INR30.094bn in the FY2008/09 and FY2007/08.
- Mobile operations hampered by a comparative lack of investment in GSM network
- Tender for 8mn DSLs will result in broadband growth for the operator as it seeks to confirm its market leadership
- In early 2009, BSNL announced plans for significant investments in IPTV
- The offer of triple-play services could revive fortunes in mobile market at the expense of Vodafone
- Potential of mobile market especially within 3G; BSNL targets 15mn 3G subscribers within three years
- Privatisation of BSNL would likely lead to increased levels of investment in the company
- Local wireless market increasingly competitive, with Vodafone Essar having just over a 22mn subscriber lead over BSNL
- Cellular service also coming under increased pressure from Reliance, which is looking to extend its GSM network in addition to its successful CDMA-based network
- Next phase of growth to come from rural India. Obstacles to rapid growth include lack of electricity, expensive network roll-out and lower income subscribers
Bharat Sanchar Nigam Ltd (BSNL) was established in October 2000 when the Department of Telecommunications incorporated its network operations outside of Delhi and Mumbai. A state-owned operator, BSNL has a mobile network serving more than 72.70mn (as of June 2010), making it India's fourth largest GSM operator. The company also served 26.94mn fixed-line subscribers at the end of June 2010. BSNL is also India's largest ISP, with 9.67mn internet subscribers, representing 57.84% of the total. The state-owned company operates in 21 of India's 23 regional circles, but does not provide services in New Delhi or Mumbai, where sister company MTNL operates.
Recent Financial Result
For the financial year ended March 31 2010, BSNL reported total revenues of INR320.454bn, down by 10.5% from INR358.119bn in FY2008/09. Meanwhile, employees' remuneration and benefits rose to INR134.550bn in March 2010 from INR113.632bn, which negated the decrease in licence and spectrum fee. Total expenditure fell by 0.8% y-o-y to INR340.780bn in FY2009/10. As a result, BSNL posted its first net loss, which came in at INR18.227bn, a significant drop from the INR5.749bn in the previous year. However, the operator's net profits have been trending downwards in the past few years.
BSNL's revenue of INR358.119bn in FY2008/2009 was down about 5.9% from the previous year's INR380.47bn. However, total expenditure increased by 2.2%, largely due to employees' remuneration and benefits, to reach INR343.542bn, to bring the operator's net profit to INR57.485, a decline from the INR300.939 in the previous year.
In order to maintain its competitiveness, BSNL has suggested it will step up its investment programme in 2008-2009 to US$4.7bn, up from US$3.5bn in 2007-2008. The Indian government has already pledged US$15.0bn of investment over the next three years.
An Indian government-formed committee suggested in March 2010 that BSNL sell 30% of its share capital in a phased manner. The government formed the three-member committee to review the performance of BSNL and to recommend measures to improve its performance. The committee recommended that proceeds from the sale of 20% of the company should be used for the employee voluntary retirement programme, expansion and operations. It was also recommended to return the remaining 10% to the government. However, government said in September 2010 that the public listing would only occur if the operator manages to improve its financial performance.
Corporate Ownership
BSNL is currently owned by the Indian state. In August 2008, it was reported that progress had been made with plans to privatise BSNL. BSNL's finance director was reported as suggesting that a 5% to 10% stake will be sold, in a deal that would value the company at about US$100bn. However, in July 2009, it was reported that BSNL was considering the option of a stake sale to a private foreign company rather than continue with its long-mooted plans for an IPO. It is understood that the move is being examined following resistance to IPO plans from employee unions. While the operator's board cleared plans to divest a 10% holding through an IPO 2009, BSNL has not indicated what level of shareholding it might offer a foreign investor. In February 2011, the Department of Telecommunications revived a plan to merge BSNL and its sister company Mahanagar Telephone Nigam (MTNL).
Mobile Services
BSNL has set a target of 60mn new additions to its mobile subscriber base by the end of 2010 and according to the latest figures, the operator has exceeded its target due to impressive growth momentum in the country. Such an expansion required a network roll-out exercise, with the operator will continue to look to extend its reach further into rural India.
In March 2008, BSNL placed a US$200mn order with Motorola and Nortel Networks for an additional 5mn GSM lines in southern India. Another tender for 25mn additional GSM lines in the same part of India is being prepared.
To keep up with Reliance and Vodafone in terms of market share, and stay comfortably ahead of Tata Teleservices and IDEA Cellular, in mid-2008 BSNL invited bids for a contract valued at US$6.5bn for the supply of 93mn additional lines in a bid to increase its capacity. It expected to receive bids from the likes of Ericsson, Nokia Siemens, Motorola, Nortel Networks, Alcatel-Lucent, Huawei Technologies and ZTE. In March 2010, BSNL announced its decision to cancel the controversial tender for the supply of equipment for 93mn new GSM lines. The operator said that continuous delays and disputes have forced it to cancel the tender. The decision came after a panel, led by Sam Pitroda, reportedly suggested abandoning the original tender. Further to this, BSNL in September 2010, has called on the Indian subsidiaries of Chinese telecoms equipment vendors ZTE Corporation and Huawei Technologies to submit their bids for a tender to supply equipment for 5.5mn GSM lines. The operator intends to deploy 3.37mn lines in the north of the country and a further 2.13mn lines in the east of India. BSNL invited bids after the Indian government provided clearances on security issues and allowed telecoms operators to procure equipment from Chinese vendors.
In what was something of a surprising move, BSNL announced in November 2007 that it had applied for a nationwide CDMA licence (fewer than 30% of India's mobile customers use CDMA technology). BSNL does already use CDMA technology, but only for limited mobility services. BSNL made this move just as one of its main competitors, Reliance, decided to extend its own GSM footprint. The decision to launch a CDMA licence follows the government's move to allow all telecoms operators to use alternative platforms.
BSNL plans to invest heavily in extending its CDMA network infrastructure across 500 towns by constructing 7,000 new base transceiver stations. The expansion of BSNL's CDMA network will see it reach 500 new towns as part of a US$100mn investment programme. It sees its extended CDMA network as a 'fall back option' to cover areas that lack GSM coverage.
BSNL launched its new postpaid tariff in December 2009, enabling its customers to be able to make calls in India at uniform tariffs irrespective of whether they are in their home circle or are roaming outside it.
BSNL announced it will expand its 3G services by 120 more cities from the existing 640 cities. The operator targets to increase its subscriber base to 2.5mn in March 2011, up from the existing 1.8mn in November 2010.
Internet Services
An increasingly significant part of BSNL's business strategy centres on the operator's internet services. BSNL launched triple-play services in early 2007, offering voice, video and internet in Pune and Chennai initially, and then Kolkata and Bangalore. BSNL's focus on its broadband offering, it hopes, will offset falling fixed-line voice revenues (and, indeed, a faltering mobile service). In January 2009, BSNL announced a major thrust for the deployment of its IPTV service portfolio. The company plans to launch services in 93 cities in 2009. Kuldeep Goyal, chair and managing director of BSNL, said that his company is looking at IPTV as a 'major value addition' that can be offered to the operator's fixed-line subscribers. BSNL is looking to have a subscriber base of about 2mn by the end of its next financial year (March 2010).
Meanwhile, BSNL is looking to offer two WiMAX tenders with an aggregate value of US$1bn; the tender will be split between rural India (funded by USOF) and an urban network (funded by BSNL). The project featured a plan to offer broadband connections through its WiMAX network in 40,000 schools by 2008 (latest available data). Soma Networks will deploy BSNL's WiMAX network across Gujarat, Maharashtra, Goa and Andhra Pradesh, with the network set to provide broadband data and voice services to an area reaching more than 200mn people.
Five companies approached BSNL in December 2009 to provide its WiMAX service on a franchisee basis. The companies -- Adishwar India, Ampouls, Teracom, E-mall Infotech and Tech Solutions -- had a minimum turnover of INR1bn (US$21.5mn) in the last two fiscal years, which qualifies them for the tender, according to bidding rules.
BSNL unveiled a new VDSL-based broadband service in February 2010 that provides the fastest speeds in the country. The service launched by the operator will enable subscribers to enjoy broadband connection with the highest download speed of up to 24Mbps at a monthly tariff of INR9,999 (US$216.4). In addition, a slower speed connection offering up to 16Mbps will be available at a monthly price of INR4,999 (US$108.19).
Furthermore, the operator plans to roll out its gigabit-capable passive optical network (GPON) in the Vijayawada district of the state of Andhra Pradesh in India, reports The Hindu. The network will enable the operator to introduce high-speed broadband services offering speeds of up to 8Mbps. BSNL also stated that it has procured the necessary equipment for launching a gigabit ethernet passive optical network (GEPON) in rural regions of the district. The operator plans to launch its GEPON services by the end of March 2010.
Strategy
One of BSNL's stated objectives is to become the largest telecoms service provider in Asia. As a state-owned operator, BSNL seeks to facilitate R&D activity in India. It also aims to contribute to the government's national plan target of 500mn mobile subscribers by 2010, as well as the achievement of 20mn broadband customers by 2010 (as per the Broadband Policy 2004). Other BSNL goals that are connected to government policy include the provision of telephone connectivity in villages and the implementation of triple-play services.
In order to achieve this, at a time when its profits are in decline due to competitively priced tariffs, the operator is increasingly looking towards infrastructure sharing. BSNL has the advantage of having a strong rural infrastructure compared to private operators and hopes to generate revenue from sharing both passive and active networks. It has signed an agreement with Aircel in October 2009 and with Sistema Shyam TeleServices in November 2009.
In addition to its network development plans within India, BSNL is actively looking to expand internationally, in a strategy that could result in operator acquisitions in Africa and the Middle East. Although no specific countries have been mentioned, it is rumoured that possible targets may include Egypt, Rwanda, Malawi, Turkey and Iran. BSNL is also part of a consortium of seven companies, Europe India Gateway (EIG), which will invest approximately US$50mn in an undersea cable link in the Atlantic. Together with fellow state-run operator, MTNL, BSNL is also involved in a separate joint venture, Millennium Telecom, which will lay two further undersea cable links to the east and west.
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