BSNL: Strategies to Tackle Competition

It is said that the year 2002 will see two large players, Bharti and
Reliance, launching their domestic long distance service in the country, along
with the basic services in multiple state circles. Presently, the two telecom
majors are building state-of-the-art broadband network in 250 cities (the target
is two years), by laying infrastructure in different state circles. Both the
companies are moving at a fast pace to launch a competitive basic service in the
country. To start with, the companies are targeting those state circles where
there are no private basic service providers or circles that are more lucrative
in terms of business.

The two future telecom giants will be the tough competitors for BSNL in the
future, as the two will have an advantage of having the best of technologies at
a cheaper price. The packetized network that they will create will help them in
handling both voice and data needs of their customers. The incumbent will always
have the disadvantage of keeping up with the old exchanges based on circuit
switching for voice telephony, and create a new network for packet switching,
thereby doubling the cost and perhaps decrease efficiency.

Worldwide, it is a known fact that the incumbents have been given time to
adjust to the corporate and competitive scenario, as facing competition is not
easy for an incumbent who has worked in a monopoly environment for a good number
of years. India’s BSNL has been deprived of such privileges and it was just
the opposite. The deregulation of the Indian telecom started in 1994, and after
seven years of deregulation BSNL was corporatized on Ist October, 2001. Though
BSNL has been corporatized, it still has the influence of bureaucrats and
politicians. This makes matter worse for BSNL as it has to fight the competition
head on with the efficient private players.

Though BSNL has been corporatized, the process of privatization is yet to
start. And this despite the fact that BSNL is the largest incumbent in the
country, with a turnover of Rs 23,034 crore in 2000-01. It seems it will take
another two years before the government divests its equity from BSNL. Having
inherited all this, BSNL has to fight competitors–Bharti, Reliance, Tata, and
others, so that the erosion of the customer base is not fast. BSNL has to work
like one of the best-run corporate in the country, and not like a public sector
organization with a strong focus on protecting the customer base, brand
building, reducing cost base, and strengthening new businesses.

Protecting Customer Base

It is not easy to keep up with the customer expectation in a deregulated
market. Hughes Tele.com has already taken a large number of high-value corporate
customers from MTNL, Mumbai, and the process is still continuing. BSNL has to
take a cue from this example and try to protect its customer base from
aggressive competitors like Bharti and Reliance. They are planning to provide
complete solutions to the corporate in terms of voice telephony, broadband, and
Internet services, from a single window. This solves the headache of the
corporates, as they now have to talk to a single party for all their voice and
data needs rather than multiple parties in the past.

The corporates will now have the privilege of getting a better service-level
agreement with the entry of private players. BSNL will have to ensure that they
will also do the same and provide a high network uptime which is backed by
prompt field support so that the network is up and running. For this, BSNL has
to upgrade its network and bring it at par with the new private operators. Since
the network is old, BSNL has to provide multiple redundancy to take care of any
eventualities and provide the best of services to its customers.

The fault rates of BSNL are alarmingly on the very high side and BSNL should
ensure that it be brought down to catch up with competitors. The key to retain
customers will be the effectiveness of customer care in providing services, such
as a single window for all queries and personalized services. This will only
happen when BSNL has a world class call center facility with a trained and
dedicated team who can solve customer queries not only through voice but also
fax and e-mail.

Much needs to be done on the billing front and here the focus should be on
how to customize billing solutions for different corporates. BSNL should also
take the initiative of providing convergent billing solutions, so that a
corporate gets a single bill for different type of services subscribed and gets
a cross-billing discount owing to its use of multiple services. The billing
process has to be error-free, and the billing cycle needs to be reduced so that
one can collect money at a faster rate and thereby, decrease bad debts. All this
will help corporate customers to increase their efficiency and they would like
to stay with the incumbent due to its vast network deployed across India.

Aggressive Branding Exercise

No road is complete without a large number of hoardings of Bharti and Essar
in New Delhi, and Hughes Tele.com, BPL and Orange in Mumbai. But it would be
very difficult to find even one hoarding of BSNL Chennai, Calcutta, and other
state circles. Before starting the branding exercise, BSNL has to transform
itself and become more customer-centric, so that it can reap the benefits of
branding in the long run. The perception about BSNL’s quality of service has
to be first practiced by the employees of the company before it can be branded.

One can see tender-related or notification-related advertisements in almost
all the newspapers but no brand building exercise by the company in any of the
newspapers. On the other hand, its competitors spend a good amount of money in
brand awareness and brand building. In most of the countries, telecom companies
are spending more on brand building than leading FMCGs, but in India, BSNL is
hardly spending any money on brand building. BSNL should start brand-building
exercise focussing on service qualities, price competitiveness (the Dolphin
advertisement from MTNL focusses on price competitiveness of cellular services)
and geographical coverage. Change in pricing structure or launch of new services
will be the key differentiator in the future, and corporate customers should be
intimated through the branding exercise, as telecom business is as much about
effective consumer marketing as about building and operating networks.

Reducing Cost Base

BSNL has started the process of increasing the efficiency and
bandwidth of the network by deploying more optical fiber cables than
jelly-filled cables, but this process has to be continued in future. The company
is even augmenting its long distance network by connecting more metros and large
cities with high capacity Dense Wave Division Multiplexing (DWDM ) systems. This
process of network upgradation will help in pruning the cost base of the company
as maintenance cost will be reduced and there will be an increase in bandwidth.

But BSNL has a large workforce of around 362,400 employees,
which contributes around 20-25 percent of the company’s turnover which is on a
very higher side. VRS schemes should be introduced and people should be
encouraged to join p-telcos, so that there is no shortage of manpower for
private players as they can utilize the available trained resource in the best
possible way. The other step would be to increase the productivity of the BSNL
employees by freezing recruitment and jumping into new services where employees
can be redeployed.

Strengthening New Services

With telecom majors orienting towards business, customer or
function, BSNL should also move from the existing structure which is based on
geography (see figure 1, page 71). As from figure 1: Building commercially
oriented organisations, we see that companies like Telefonica and Sonera has
moved from centralized unit, organized around customer groups, to decentralized,
business units based around product groups. On the other hand, Swisscom and BT
have moved from centralized unit organized around customer groups to centralized
business model based around functions.

BSNL was also thinking of moving away from the
geography-based model to business organized around functions, so that the
company can pay more attention on new services and it can be strengthened, but
things are moving at a very slow pace in BSNL on this front. For instance, it
seems the cellular services that BSNL is planning to deploy in 650 cities will
be launched not before June 2002, as most of the turnkey providers have recently
bagged the tender and they have to deploy it in eight months time. But it seems
both the third and the fourth operators will start at the same time, thereby,
losing the third cellular operator’s advantage. Being the third operator, BSNL
should focus on providing world class coverage by building state-of-the-art
network and targeting its services more towards lower and middle income groups.
BSNL has to increase the retail presence of cellular services, so that it can
reach out to a large segment of the targeted group and even the pricing is
attractive for those users.

The p-telcos will launch Intelligent (IN) services at a later
stage, however, BSNL has the advantage that they can launch IN and value-added
services thereby, providing more value in comparison to p-telcos.

It will not be an easy task for BSNL to execute all the above
strategies. But they will have to do it if they want to stay competitive in the
race to share the biggest pie of telecom.

Pravin Prashant