TOP GROUPS: Growth is Now DoT-ted

The Department of Telecommunications (DoT) has a legacy to maintain, ruling
the telecom industry, and that job is being done well. As the nerve center of
all telecom policies and activities, DoT has managed to handle the growth quite
efficiently.

But as always, the road to success is dotted with potholes. And, DoT has
stumbled on these potholes. To be fair, it becomes difficult to keep everyone
happy especially if you have a majority stake in the four telecom PSUs, which
account for almost 66 percent of the total telecom services revenues in India.

Spectrum allocation, bandwidth pricing, universal service obligations, tariff
plans, implementation of unified license regime, license fees: the list of
contentious issues goes on. DoT has—via TRAI, TDSAT, and WPC—been trying to
resolve these issues but the demands from the industry keep growing. DoT is
looking after an over 77.5 million-line telephone network, which is the fifth
largest in the world and the second largest among emerging economies of Asia. It
has achieved a tele-density of 7.12 and plans to ensure a teledensity of 15 by
the year 2015.

Of the four PSUs under the department; BSNL, MTNL, and TCIL have increased
revenue. But, competition from the private players in telecom turnkey and
manufacturing segments has forced ITI to register negative growth. TCIL has
shown positive growth due to its overseas projects. BSNL and MTNL should be
given credit for managing growth despite having exhausted their GSM network
capacity and a growing number of fixed phone surrenders.

BSNL emerged a giant with 86 percent of wireline subscribers at 35.43
million; and 6.15 million mobile subscribers or 18 percent of the mobile market.
It has also leads the ISPs with 934,950 Internet subscribers.

BSNL´s plans have always been grand and they get good response, till red
tape stumps them. Its entry in the mobile segment, made the private players go
back to the boardrooms. But lack of foresight and the lack of lines stagnated
the growth. Similarly, the franchisee model did not take off, so BSNL has
revamped its broadband strategy and has now floated tenders for DSL lines.

This fiscal, the company plans to spend Rs 10,000 to 12,000 crore on
expansion of its services. This will include 15 million GSM lines, and the DSL
services, which are expected to attract five lakh subscribers by 2005 across 198
cities. But as a tragic business decision, it is not open to the idea of
co-locating the last-mile copper to other DSL service providers, as suggested by
TRAI.

Among newer technologies, BSNL plans to conduct Wi-Max pilots in five cities
and is looking to set up 1,000 Wi-Fi hotspots across the country. Its plan to
enter ILD business is still under review. However, the company managed to get a
better pricing on bandwidth for its ILD services this year.

After successfully completing the NIB I project, evaluation is on for NIB II.
But, BSNL has still to prune its 3.25 lakh workforce to become more efficient,
improve client services, and get rid of red tapism to face the competition. And,
it is still a mystery why DoT is continuing with an acting CMD and not
appointing a full-time CMD to the sixth largest telecom company in world. Not
only BSNL, DoT too has been plagued by vacancies and that affects overall
performance.

MTNL managed to ride out the negative on its balance sheet. However, it is
facing stiff competition from private cellular operators. The 58,000-employee
company has been loosing fixed-phone customers. Though the private companies
offer mainly wireless fixed services, the wireline business of this mini-ratna
is facing an uphill task in retaining its subscriber base.

MTNL´s expansion will include 450 additional base transceiver stations in
Delhi and Mumbai. The company is also adding eight lakh lines each for GSM and
CDMA. MTNL has also gone ahead with its overseas plans in Nepal and Mauritius.
However, there has been no word from DoT on the rumors of merging BSNL and MTNL,
which got stronger after the former asked for services rights in Delhi and
Mumbai.