BSNL: Happening  Times

VoicenData Bureau
New Update

For the past many days, the attendant at a BSNL-managed PCO at Mumbai airport

has been busy answering inquiries about BSNL’s Cell One mobile services. A

large number of people standing at the counter want to know if Cell One service

is available in Mumbai. Some of them are even looking for an application form

for the Cell One connection.


What is surprising is that most of the people seeking information on Cell One

are residents of Mumbai, a city that does not fall under BSNL’s mobile service


That’s just an anecdote reflecting BSNL’s spectacular success in cellular

services since the behemoth rolled out its nationwide network as a fourth

operator six months ago.

"We have created a new market wherever we have gone. As much as 90

percent of our subscribers are first-time mobile phone users," a beaming

Prithipal Singh, chairman and managing director, BSNL says. Singh may not be off

the mark as our analysis of the February—March 2003 cellular subscriber data

shows (see table). More than 95 percent of customers that BSNL added to its

kitty during these two months were new users. If we look at the February—March

period, there were only nine instances where there was a decline in the

subscriber base of an operator where BSNL had its service, excluding Chennai and

Kolkata. The total decline was to the tune of just 37,823 subscribers, while

BSNL added a total of 985,197 subscribers during the period. If we presume that

the private operators’ loss was BSNL’s gain, then only around 4 per cent of

BSNL’s new subscribers in the two months came from other operators.


Act–BSNL Mops up Four Times More

than the Rest Put Together

circle-by-circle comparison of the number of subscribers added by BSNL and

other operators during February—March

23 (the four metros and the Northeast region have not been included)
Circles Aircel




BSNL Escotel Fascel Hexacom Hutch Idea

Reliance Spice
AP 3541 101636 -4,645 5,360
Bihar 38913 11,845
Gujarat 3549 123033 29,940 -971
Haryana 1,794 9618 26232 -1,204
HP 2,304 6468 1,636
Karnataka 26758 94284 6,272 -2,551
Kerala -11385 138 92419 3,808
Maharashtra 8478 2409 115460 4,372
MP 11988 44112 27,992 7,287
Orissa 42947 -3,063
Punjab 63611 60527 11,341
Rajasthan -1,088 28,185 11,826

-12313 1834 86078

22,738 34920

4,845 51,775 13,688
WB 38,208 -603

23,444 108,690 2,304 4,381 985,197 16,292 29,940 11,826 1,627 36,753 17,102 8,790

BSNL has changed India’s mobile landscape in another respect. While

majority of the cellular subscribers prefer prepaid connections, BSNL has got

more of the postpaid variety. According to one estimate, 55 percent of its

subscribers have postpaid connections. Contrast this with the market leader

Bharti which had just 24 percent postpaid subscribers at the end the financial

year 2002—03.


these benefit BSNL more?
n Forming

Yes, because that can be a

precursor to a lean fighting machine with each unit focusing just on

one core business. That would also help it neutralize allegation of

cross subsidization and achieve regulatory mandates like accounting

separation more smoothly.
n Partnering

with ISPs for Broadband with the ISPs acting resellers:

Yes, because that would help it gain from their service marketing

and selling experience especially when it is looking at franchisee

model to roll out its broadband service.
n Focus

on DSL — Tie up with PC or other access device vendors:

Yes, because unlike Japan or South Korea India has low PC

penetration. BSNL can use it clout (huge subscriber base) to get

affordable PC deals for its broadband target customer base.
n Creating

a separate marketing company for corporate clients:

Yes, because then BSNL would be able to target corporates more

effectively. It has to be noted that most private competitors of

BSNL have corporate users as their first priority and they are the

first group that these operators want to wean away from BSNL.
n Going

Yes, but only if it thinks it’s

the best way of raising money to fund its expansion plans. However,

going public for the sake of making it more professional and less

immune to political interference is not worth considering. The MTNL

experiment shows that going public offers no such guarantee.

BSNL Merger:
No, because in this age of

privatization and disinvestment, creating a giant corporation by

bringing two state companies together makes no sense. Also, the two

are class apart — BSNL is giving competitors a run for their

money, competition does not take MTNL too seriously (remember what

happened to its Dolphin and Garuda services?)
n Going

Global Aggressively:
Yes, because if a

Malaysian operator can build a successful business in the

neighboring Sri Lanka, why cannot BSNL do it.

Today, BSNL is being lauded everywhere for its success. But things were not

the same in the months preceding the launch of Cell One. Not only was it being

criticized for delaying the roll out of the service time and again, many were

asking why BSNL was getting into a business where there was already so much of

competition. Many, including the private operators, thought it would go the MTNL

way whose cellular service Dolphin failed to take off despite cheaper tariffs.

They thought that BSNL would be lucky even if it crossed the one-lakh mark.

No doubt, all this created a lot of pressure on BSNL to prove its critics

wrong. "It was a sort of challenge. And it was necessary to show it to the

people that BSNL can get into a new service and compete with the best in that

space," Singh recalls. He adds, "However, it was more enthusiasm then

pressure that drove us."

So what made so many people prefer a state operator that was getting into an

uncharted territory? And that too in a market well entrenched with private

operators considered more market savvy and customer friendly? It is true that in

most areas, private operators committed the mistake of dismissing BSNL as just

another state operator that was getting into the business just for the sake of

it. However, attributing BSNL’s success only to complacency of its rivals

would mean undermining the other ingredients behind its success. The tariff

plans designed by BSNL that lowered the entry costs for new subscribers

(especially those who owned a BSNL landline) have surely been a major factor

behind its success. But more than low tariffs, it was the simplicity of tariff

plans with no hidden costs that endeared BSNL to such a huge number of

subscribers. Perhaps BSNL was smart enough to realize the fact that customers

get confused and overawed by too many tariff plans. Some private operators offer

some 80 tariff plans, each more complex then the other. Given all this, BSNL

tariffs appeared attractive to the lower middle and middle-income group

subscribers, the group that is supposed to represent India’s huge potential

subscriber base.


Elephant into Leopard


expects to achieve a turnover of around Rs 25,500 crore this year.

Growth, which is being stimulated by new lines, is being neutralized

by tariff decline. On the other hand, its liabilities and capex are

growing fast. In the year 2003-04, it would be spending around Rs

12,000 crore on upgrading its network and services, 60 per cent of

which would be spent on GSM expansion and the rest on WLL, landline,

broadband and ILD. Its liabilities this year could go up to Rs 8,000



doubt all this has put a tremendous pressure on BSNL to increase its

operational efficiency. Obviously, the company is now looking

at cutting operational expenditure wherever possible. For example,
it is planning a VRS to prune surplus manpower. Employees are also

being encouraged to take up franchisees of various BSNL services. It

is aiming to bring the number of per line staff to 9 per 1,000 from

the existing 30 per 1,000. In fact, the staff-line ratio in its


business is 1:600.

It is also looking

at outsourcing non-core operations like bill collection and customer

care operation to companies like ICICI.

BSNL’s thrust on network design and coverage also paid off. Spread across

the length and breadth of the country, BSNL cellular service was taken to some

1,100 towns and cities in just six months. Most of the BSNL customers recited

their happy experience of using their mobile phones seamlessly on highways and

railway tracks. BSNL officials were sure from the very beginning that network

coverage of areas where there was a lot of people movement but which were beyond

normal city or town limits would be their USPs. Of course, rolling out network

in places where there was either no service or the private operator was not

active enough also helped in notching up numbers.

The physical distance from Sanchar Bhawan, BSNL’s earlier abode, to its

Statesman House headquarters at New Delhi’s busy Barakhamba Road is not even

two kilometers. But there are many reasons to believe that BSNL has travelled a

long way since it moved out of Sanchar Bhawan. That movement signified more than

a mere symbolic assertion of a new corporate identity.


Gone are the days when work on Saturdays and Sundays was an absolute no.

Today, many important strategy meetings take place on these days. And there is a

more professional approach to business. A small group called the Strategic

Planning Group that reports directly to the CMD quietly brainstorms on all

rollout and business plans before presenting the strategy to him.


Action Plan
n n Up to 3 million

more cellular lines to be added by August-September.
n n Cellular Network

to be upgraded to GPRS another two-three months.
n n It has a target

for 6.1 million lines for the year 2003-04, of which it expects 4 million

from its GSM service.
n n Up to 70 cities

to be covered by limited mobility services in two months
n n V5.2 to be

upgraded to CDMA 20001x once the controversy settles down
n n Broadband

Services in 84 cities by the end of this fiscal year.
n n To provide a

range of IP and new value added services in the next two years through the

National Internet Backbone Phase-II (NIB-II) Project.
n n ILD Services by

March 2004
n n Bill processing

and collection to be outsourced
n n

BSNL is looking at a top marketing-advertising agency and has earmarked
n Rs

250-300 crore to spend on marketing and branding efforts in 2003-04.
n n Planning to

provide high bandwidth wireless access through fixed wireless technologies

such as LMDS & Free Space Optics (FSO).

More Aces up the Sleeve… Broadband Is One


BSNL’s new-found success in the cellular business could be the first in a

row of potential new accomplishments.

The operator that reinvented itself in just six months to

become India’s second largest cellular operator (and which is well on its way

to become the No. 1 within a couple of months) has its eyes set on a nationwide

rollout of broadband services. Broadband services, it believes, would be the key

to neutralizing the decline in earnings from plain voice services and help it

boost its bottom line. However, while the operator exudes confidence that there

is a market for broadband services, as of now it is not ready to hazard a guess

on what kind of revenues it is expecting from this segment in the next one year.

Using ADSL as the technology, BSNL would be targeting its

fixed line subscribers with broadband connections. Apart from working out

affordable tariffs (which it believes would be key to for its broadband services

to be successful), the company is also looking at stimulating local content

industry. Acknowledging the success of broadband in Korea as a source of

inspiration, BSNL has been closely consulting Korean broadband service providers

on finer aspects of the service and business.


On the drawing board for more than a year now, BSNL’s

broadband plans took flight with the successful run of its pilot project in

Kolkata. The pilot is now being commissioned at Bangalore and Pune in June and

would be extended to Chennai Hyderabad, Ahmedabad and Chandigarh by the end of

August. By the end of the current financial year, BSNL officials say, the

broadband offering would be extended to 84 cities.

What is unique about BSNL’s broadband plan is that it is

experimenting with a service model that has not been tried anywhere in the world

by an incumbent. All over the world, in countries where broadband has achieved

some degree of success, incumbents have taken two routes. One, they have

unbundled their local loops, which have been used by private service providers

to offer ADSL services. Two, incumbents themselves have aggressively offered

broadband services on competitive terms. BSNL, apart from making efforts on its

own, is also experimenting with the franchisee model to offer services.

Franchisees are being offered a share in the revenue that would be earned from

the broadband service. "We want people to exploit our network," Singh


It is noteworthy that when BSNL invited expression of

interest from parties interested in using BSNL’s network to offer broadband

service, the proposal generated lukewarm response. It is argued that the terms

and conditions of the proposal were not considered attractive enough. However,

that has not deterred BSNL from going ahead with its broadband plans. It is now

in the process of evaluating proposals received in response to another

expression of interest. "We are open to the idea of tying up with anybody

who has got a good proposal," Singh is forthright in his approach.

Then why have ISPs been barred from participating in the

initiative? Is that largely because at this stage they are seen as competitors?

"We are not against a relationship with them. However, as of now the idea

has not been thought over," he adds.

Enterprise Focus

BSNL is targeting corporate customers with a two-fold strategy centered on

technology and network upgradation, and marketing and customer care.

While BSNL exchanges have already been connected with fiber,

it is now taking fiber to important commercial buildings. All the towns and

cities with more than 150,000 lines will be covered under this. BSNL is

extensively using digital loop carrier (DLC) and wireless in local loop (WiLL)

system for improving reliability of external plant. Remote line units (RLUs) and

remote subscriber units (RSUs) are being provided extensively to reduce the long

lengths of copper cables. A countrywide network management and surveillance

system (NMSS) has been deployed to ensure uninterrupted and efficient flow of

telecom traffic. NMSS is being managed from network management centers at Delhi,

Mumbai and Kolkata.

BSNL is also reorienting its corporate marketing by not only

appointing corporate account managers but also tying up the network integrators

like Wipro and HCL for offering what it says would be total networking solutions

to corporate customers. A business development group is working with the CMD to

make strategies for targeting corporate customers.

One of the steps that BSNL has taken in this direction is the

identification of what it calls ‘commercially important customers’ or CICs.

Organizations that have 10 or more telephone connections, and those that have

less than 10 connections but total bimonthly telephone bill of more than Rs

10,000, have been defined as CICs.

"We have appointed account managers in every circle and

they have been directed to personally take charge of the corporate

customers," Prithipal Singh informs.

Another major initiative that BSNL has taken is the setting

up of 3,200 customer service centers to help customers, primarily corporates.

The existing customer interfaces of BSNL are getting a facelift and employees

are being put through special training sessions. BSNL is also trying to match

the flexible pricing options offered by some of the private operators. In simple

terms, a corporate customer can now bargain on prices of various services,

including calling rates. The newly designated account managers have been

empowered to offer volume discounts and match tariffs offered by private


Another initiative taken by BSNL, which is likely to benefit

the corporate customers, is the ‘Corporate Group Billing Scheme’. Under this

scheme, all phones of a company as well as phones in the names of subsidiary

companies and sister concerns can be included in a single bill. A consolidated

monthly bill for all telephone lines (PSTN/ISDN) will then be issued on the

allotted group number. Discounts are being offered to group billing customers.

At present, this is available for rent, call charges, trunk calls, phonogram at

5 percent for the amount exceeding Rs 1 lakh and at 10 percent for the amount

exceeding Rs 2 lakh.

BSNL is also looking at exploiting business opportunities

available with the state governments. "We are also in talks with the state

governments like AP and Karnataka for providing them with total networking

solutions for their e-governance and other needs," Prithipal Singh says.

Going Slow on CDMA?

While BSNL has been aggressively pursuing the goal of becoming India’s

largest GSM operator, it has been relatively slow with its CDMA rollout. Unlike

GSM wherein it covered around 1,100 cities in six months, it is looking at going

to only 70 cities with its limited mobility services in the next two months.

According to analysts, the progress has been slow on this

front largely because of the controversy surrounding the limited mobility

services. While Reliance Infocomm and Tata Teleservices have gone for a CDMA1X

2000 based network, BSNL’s CDMA network is V5.2 based. It does want to upgrade

its network to CDMA 1X 2000 but only after the controversy settles down.

All this has resulted in BSNL taking a piecemeal approach

towards CDMA services. The company believes that in the existing environment,

growth would come form GSM at least for the next one year. That is because, it

says, it would be using CDMA only for limited mobility services in urban areas

and pockets in rural areas. "We will continue with this approach for two

years. By then we expect the limited mobility controversy to be over,"

Singh opines. He does not feel that going slow on this front would mean losing

out to currently aggressive players like Reliance Infocomm and Tata Teleservices.

"We entered late in the GSM business and look at the impact we made,"

he reminds those trying to find fault with BSNL’s go-slow approach on CDMA.

He also adds that ultimately BSNL is looking at only one

wireless standard. Interestingly, Singh considers CDMA to be a superior

technology as compared to GSM and sees it as the wireless standard of the


Upcoming, International Long Distance

Another segment where BSNL is looking at making an impact is the

international long distance. BSNL’s

strategy in this space is likely to be in place by the end of this month. It is
expected to focus more on the outgoing calls market. "Like in the cellular

business, we would like to create a new market here," Singh says. BSNL

expects the outgoing traffic to increase after it gets in. It is likely that

BSNL would enter the market using lower tariffs as a tool.

It is be too early to say what kind of impact BSNL will make

on the ILD market. As of now, it believes that its unmatched fixed and cellular

customer base is a ready market for its ILD services. However, that advantage

could last only till BSNL abides by the TRAI order on Carrier Access Code (CAC)

that aims at enabling the subscribers to select the international long distance

carrier of its choice. A lot after that would depend on how innovative BSNL is

with its marketing.

The infrastructure for outgoing traffic is to be in place by

April 2004, though incoming calls would start much earlier. BSNL is presently

considering all types of tie-ups and proposals in order to effectively tap the


BSNL’s success in the mobile business has brought it

applaud from all directions. More than that it has proved that public sector

companies can give competitors a run for their money. The success, however, also

means that BSNL would now be under increasing pressure to repeat its success in

services like broadband.

Ravi Shekhar Pandey