NLD: Catch 22

VoicenData Bureau
New Update

Despite apparent fall in margins, the NLD players learnt to make money and

the NLD segment clocked about Rs 9,017 crore in FY 2005-06. The predominant

position of BSNL remained unchallenged in the NLD segment in

FY 2005-06, Bharti stayed put at the second place with Rs 801 crore,

Reliance stood third, and VSNL fourth.


The regulatory changes that were made, put the market in a dilemma. The entry

fee for NLD license was reduced to Rs 2.5 crore from Rs 100 crore. That was good

news for the market-more players could join into the telecom and

infrastructure revolution of India, and the demand for infrastructure would


While already established payers are not publicly complaining about this new

explosion in the market, they know that their margins would be chased even

further away.

The Players

Banking on the sheer size of its network, BSNL continued to lead in NLD

business in India with revenues of about Rs 6,792 crore. Though its market share

continued to decline, it grew at about 35% in FY 2005-06. It had laid about

496,000 Rkm of OFC and about 63,820 Rkm of microwave links till the end of FY

2005-06. The company plans to add another 16,000 Rkm of OFC in the remainder of

FY 2006-07. It also had 281 satellite stations in FY 2005-06 and had invested

about Rs 2,100 crore into its backbone infrastructure.


Bharti came in second with revenue of about Rs 801 crore, growing at more

than 66%. It also increased its market share slightly to corner about 9% of the

market. Bharti had more than 32,900 Rkm of optic fiber on its NLD network,

adding about 5,000 Rkm in the FY 2005-06 fiscal. From this network, it made Rs

43.5 crore from sale of IRUs. The company terminated more than 70% traffic at

local exchanges. For the data network, it had 17 domestic switches and 102 MPLS


Reliance continued its impressive growth, slowing down only slightly to a

growth rate of 81% to clock revenue of about Rs 689 crore. The company stayed in

the third place and had a market share of about 8%. Its network stood at more

than 61,500 Rkm of OFC in the country, in addition to 20,000 Rkm of metro

ethernet network in the cities. The NLD network was kept busy with about 9.5 bn

minutes of voice, and with 90% of this traffic being terminated on local

exchanges, the company also made the most of these minutes. The company had MPLS

network in more than 170 cities. Its city network was connecting more than

50,000 buildings and providing broadband to more than 500 buildings. The company

also had over 150 MPLS VPN customers, and it claimed a 25% share of the market.

Top NLD Operators

(Based on Revenue)



Revenue (In Rs crore)


(in %age)

Market Share

(in %age)

FY 2004-05

FY 2005-06






















































*HECL, Tata Power

Broadband, Delhi Metro



CyberMedia Research

VSNL grew at 158% to post about Rs 595 crore in revenue

from its NLD business. The growth was fuelled by a four-fold increase in the

subscriber base, increased presence in the country, and its strong presence in

the enterprise connectivity market. It grabbed about 7% of the market. The

company increased its presence to 197 cities in FY 2005-06, compared to 137

cities in FY 2004-05. The company also grew its data services net with 118 MPLS

PoPs in 75 cities during FY 2005-06. In 2004-05, it had 110 PoPs in 68 cities.

The IP VPN PoPs also increased from 10 to 15 in FY 2005-06. VSNL's NLD network

is now one with that of Tata group for all practical purposes, and this network

stood at 34,670 km in FY 2005-06.

Utility Players

Three utility players-RailTel, GailTel, and PowerTel-are part of a

strategic alliance to face competition in telecom business together. Sure there

are overlaps in their existing network, but when this consortium does

materialize, its network would be larger than that of most of the private NLD

players. With migration to NLD, these utilities will be able to serve a wider

market and the government departments too.

RailTel: It led the utility players with Rs 62 crore, growing at more than

77%. Undoubtedly it has the largest network of all the utility players, with

about 2,500 PoPs over 29,000 Rkm of fiber along its railway tracks and stations,

of which 25,000 Rkm is lit. Its operations currently include activities under IP

I, IP II, and IP VPN licenses. It had a letter of intent for IP VPN when the

migration path to NLD was opened up. It has received a letter in intent for NLD

license, and has ambitious plans from it.


Its MPLS network is now ready to start servicing. The company is also

analyzing the prospect of getting into the retail STD business, and is open to

the prospect of becoming a basic operator too.

Companies Planning for NLD

  • Aksh Broadband

  • Dishnet Wireless

  • GailTel

  • HCL Infinet

  • HECL

  • Hutchison Essar

  • i2i Enterprise

  • Oil India


  • RailTel


  • Sify Communications

  • Spice


  • Tulip IT

Its total investment in the network till FY 2005-06 was about Rs 800 crore,

most of this by Indian Railways, RailTel's contribution to it is around Rs 250

crore, mostly in electronics. It proposes to invest another Rs 120 crore in the

current fiscal. In FY 2005-06, it sold 2464 E1, and targets around 4000 E1s for

FY 2006-07.


PowerTel: The company brought in about Rs 40 crore, growing at 48%. It has a

letter of intent for NLD license, and proposes to tap the enterprise data and

VPN market after getting the NLD license. PowerTel has an OFC network of 18,800,

15,300 Rkm overhead, and 3,000 Rkm underground. It only plans to scale to 20,000

currently, and then it will look to strengthen the network with activities such

as closing the linear loops. The company is now present in all regions of the

country, though it is strong in the north. With a strengthened network, the

company is planning to go for NLD as well as ILD offerings. Like RailTel, this

company too is evaluating the switched voice business. The capacity used on its

network was 9Gbps.

PowerTel had invested about Rs 855 crore in its network till March 2006.

Despite its network being smaller, PowerTel network is of a very high quality,

and being overhead, it is vandalism free and costs less in maintenance.

GailTel: The company brought in slightly more than Rs 18 crore in FY 2005-06.

The company is into the activities of IP I (leasing of dark fiber) and IP II

licenses. It has the smallest network of the three consortium partners with

12,500 Rkm. After a major expansion last year, it now has a presence in South

India too, and the network has a current capacity of 2.5 Gbps, which is of

course upgradeable to any levels. GailTel invested around Rs 31 crore in its

network last year, taking the total investment to Rs 330 crore.


It has an ambitious plan to get into city access networks by forming JVs with

its city gas partners. Wherever the company has a JV for city gas activities, it

plans to have a city access network, which would be primarily set up for gas

station connectivity. This project will complement GAIL's plans on the NLD

license, after which it will be able to provide intra/inter city links to the

service providers and enterprises. The company earned revenue of Rs 18.32 crore

in FY 2005-06.


Every industry seems to go through a phase when it becomes so lucrative that

everybody runs to it. The hope is that the huge potential will be able to

accommodate many more players in telecom. Some of the new NLD players have hopes

of going on to become larger players in the telecom business in India.

However, there remains a fear that a shake out may happen before all players

are able to find foothold in the market. The established players in the industry

had already been crying hoarse that there is already too much competition in the

market. There are too many scenarios to cite as examples. The current crop of

ILD players in India is already benefiting from the collapse of players who

rushed in to benefit from the huge potential of the international connectivity


God forbid that a similar fate meets the new telecom moguls of India.

Alok Singh