TOP GROUPS: The Power of Reach

There is no doubt that the Department of Telecom (DoT) in India is still a
great power center. But, this is not due to the fact that it makes the rules by
which the telecom industry operates. The department also controls a majority
equity stake in four of India’s largest telecom companies. It still has a
significant role to play in the allocation of funds to these PSUs. Though it may
not be interfering in the day-to-day functioning of these companies, it does
wield considerable influence over them. The companies under its fold are into
both, telecom services and telecom equipment and turnkey businesses. The telecom
service operators BSNL and MTNL constitute about 66.5 percent of the revenue
generated by the entire telecom services industry.

And the equipment companies account for more than 8 percent of the entire
equipment industry’s revenues.

BSNL: Having just celebrated the 150th year of telecommunication in
the country, BSNL was a charged-up company during FY 2002—03. It undertook one
of the largest mobile network rollout in the world–making its cellular phone
service ring in at almost every nook and cranny of the country. And by the end
of the fiscal, BSNL had captured a large 18 percent share of the country’s
cellular subscriber base, thus becoming the second largest mobile operator in
India.

In basic services and NLD operations, where it is having over 80 percent
market share, it has to reinvent itself from achieving targets to providing
quality and customer-friendly service. In the corporate market for domestic
leased circuits and datacom services, BSNL could have already taken the right
steps. It has its optical fiber cables laid in the remotest areas of the
country. The National Internet Backbone project is about to enter the second
phase, and technologies like MPLS routing have been implemented across major
cities. All this is expected to bear fruits in the years to come. However, even
in this capex-intensive activity, the competition is heating up.

BSNL’s 150 years of experience and an incomparable wealth of legacy network
are its biggest assets. And the mobile success it achieved during the last
fiscal augurs well for it. However, some rationalization needs to be done with
respect to its social obligations.

MTNL: Once the jewel in DoT’s crown, this Miniratna used to lord
over two of the most lucrative telecom markets in India–Delhi and Mumbai. Not
anymore! Companies like Bharti, Hutch, Tata and Reliance have stolen the thunder
from it. MTNL clearly lost out, as it was not quick enough to spot the mobile
opportunity. For instance, AirTel has been adding mobile subscribers at the rate
of more than 50 percent per year in Delhi since its launch in 1996, while MTNL’s
basic phone subscriber base is stagnating at a 3 percent growth rate. After a
disastrous experiment with wireless-in-local-loop, it was only recently that
MTNL took the necessary step of getting aggressive to the challenge posed by the
cellular service providers and new basic service operators. It is going to be an
uphill task for the company, as it has not been used to the fiercely competitive
scenario that exists today. To survive, MTNL will need to have greater
operational independence and professional management.