Bharat Sanchar Nigam Ltd -BSNL Company SWOT Analysis Report
Strengths
- Integrated telecoms operator offering fixed-line (local and DLD/ ILD), fixed-wireless, mobile and broadband services
- Leading local fixed operator, with more than 65% market share and about 78mn mobile subscribers (September 2010) in a fast-growing market. India's fourth largest GSM operator
Weaknesses
- For the financial year ended March 2010, BSNL reported a net loss of INR18.227bn, a significant change of the net profits of INR5.749bn and INR30.094bn in the FY2008/09 and FY2007/08.
- Mobile operations hampered by a comparative lack of investment in GSM network
Opportunities
- Tender for 8mn DSLs will result in broadband growth for the operator as it seeks to confirm its market leadership
- In early 2009, BSNL announced plans for significant investments in IPTV
- The offer of triple-play services could revive fortunes in mobile market at the expense of Vodafone
- Potential of mobile market especially within 3G; BSNL targets 15mn 3G subscribers within three years
- Privatisation of BSNL would likely lead to increased levels of investment in the company
Threats
- Local wireless market increasingly competitive, with Vodafone Essar having just over a 22mn subscriber lead over BSNL
- Cellular service also coming under increased pressure from Reliance, which is looking to extend its GSM network in addition to its successful CDMA-based network
- Next phase of growth to come from rural India. Obstacles to rapid growth include lack of electricity, expensive network roll-out and lower income subscribers
Company
Overview
Bharat
Sanchar Nigam Ltd (BSNL) was established in October 2000 when the Department of
Telecommunications incorporated its network operations outside of Delhi and
Mumbai. A state-owned operator, BSNL has a mobile network serving more than
72.70mn (as of June 2010), making it India's fourth largest GSM operator. The
company also served 26.94mn fixed-line subscribers at the end of June 2010.
BSNL is also India's largest ISP, with 9.67mn internet subscribers,
representing 57.84% of the total. The state-owned company operates in 21 of
India's 23 regional circles, but does not provide services in New Delhi or
Mumbai, where sister company MTNL operates.
Recent
Financial Result
For
the financial year ended March 31 2010, BSNL reported total revenues of INR320.454bn,
down by 10.5% from INR358.119bn in FY2008/09. Meanwhile, employees'
remuneration and benefits rose to INR134.550bn in March 2010 from INR113.632bn,
which negated the decrease in licence and spectrum fee. Total expenditure fell
by 0.8% y-o-y to INR340.780bn in FY2009/10. As a result, BSNL posted its first
net loss, which came in at INR18.227bn, a significant drop from the INR5.749bn
in the previous year. However, the operator's net profits have been trending
downwards in the past few years.
BSNL's
revenue of INR358.119bn in FY2008/2009 was down about 5.9% from the previous
year's INR380.47bn. However, total expenditure increased by 2.2%, largely due
to employees' remuneration and benefits, to reach INR343.542bn, to bring the
operator's net profit to INR57.485, a decline from the INR300.939 in the
previous year.
In
order to maintain its competitiveness, BSNL has suggested it will step up its
investment programme in 2008-2009 to US$4.7bn, up from US$3.5bn in 2007-2008.
The Indian government has already pledged US$15.0bn of investment over the next
three years.
An
Indian government-formed committee suggested in March 2010 that BSNL sell 30%
of its share capital in a phased manner. The government formed the three-member
committee to review the performance of BSNL and to recommend measures to
improve its performance. The committee recommended that proceeds from the sale
of 20% of the company should be used for the employee voluntary retirement
programme, expansion and operations. It was also recommended to return the
remaining 10% to the government. However, government said in September 2010
that the public listing would only occur if the operator manages to improve its
financial performance.
Corporate
Ownership
BSNL
is currently owned by the Indian state. In August 2008, it was reported that
progress had been made with plans to privatise BSNL. BSNL's finance director
was reported as suggesting that a 5% to 10% stake will be sold, in a deal that
would value the company at about US$100bn. However, in July 2009, it was
reported that BSNL was considering the option of a stake sale to a private
foreign company rather than continue with its long-mooted plans for an IPO. It
is understood that the move is being examined following resistance to IPO plans
from employee unions. While the operator's board cleared plans to divest a 10%
holding through an IPO 2009, BSNL has not indicated what level of shareholding
it might offer a foreign investor. In February 2011, the Department of
Telecommunications revived a plan to merge BSNL and its sister company
Mahanagar Telephone Nigam (MTNL).
Mobile
Services
BSNL
has set a target of 60mn new additions to its mobile subscriber base by the end
of 2010 and according to the latest figures, the operator has exceeded its
target due to impressive growth momentum in the country. Such an expansion
required a network roll-out exercise, with the operator will continue to look
to extend its reach further into rural India.
In
March 2008, BSNL placed a US$200mn order with Motorola and Nortel Networks for
an additional 5mn GSM lines in southern India. Another tender for 25mn
additional GSM lines in the same part of India is being prepared.
To
keep up with Reliance and Vodafone in terms of market share, and stay
comfortably ahead of Tata Teleservices and IDEA Cellular, in mid-2008 BSNL
invited bids for a contract valued at US$6.5bn for the supply of 93mn
additional lines in a bid to increase its capacity. It expected to receive bids
from the likes of Ericsson, Nokia Siemens, Motorola, Nortel Networks, Alcatel-Lucent,
Huawei Technologies and ZTE. In March 2010, BSNL announced its decision to
cancel the controversial tender for the supply of equipment for 93mn new GSM
lines. The operator said that continuous delays and disputes have forced it to
cancel the tender. The decision came after a panel, led by Sam Pitroda,
reportedly suggested abandoning the original tender. Further to this, BSNL in
September 2010, has called on the Indian subsidiaries of Chinese telecoms
equipment vendors ZTE Corporation and Huawei Technologies to submit their bids
for a tender to supply equipment for 5.5mn GSM lines. The operator intends to
deploy 3.37mn lines in the north of the country and a further 2.13mn lines
in the east of India. BSNL invited bids after the Indian government provided
clearances on security issues and allowed telecoms operators to procure
equipment from Chinese vendors.
In
what was something of a surprising move, BSNL announced in November 2007 that
it had applied for a nationwide CDMA licence (fewer than 30% of India's mobile
customers use CDMA technology). BSNL does already use CDMA technology, but only
for limited mobility services. BSNL made this move just as one of its main
competitors, Reliance, decided to extend its own GSM footprint. The decision to
launch a CDMA licence follows the government's move to allow all telecoms
operators to use alternative platforms.
BSNL
plans to invest heavily in extending its CDMA network infrastructure across 500
towns by constructing 7,000 new base transceiver stations. The expansion of
BSNL's CDMA network will see it reach 500 new towns as part of a US$100mn
investment programme. It sees its extended CDMA network as a 'fall back option'
to cover areas that lack GSM coverage.
BSNL
launched its new postpaid tariff in December 2009, enabling its customers to be
able to make calls in India at uniform tariffs irrespective of whether they are
in their home circle or are roaming outside it.
BSNL
announced it will expand its 3G services by 120 more cities from the existing
640 cities. The operator targets to increase its subscriber base to 2.5mn in
March 2011, up from the existing 1.8mn in November 2010.
Internet
Services
An
increasingly significant part of BSNL's business strategy centres on the
operator's internet services. BSNL launched triple-play services in early 2007,
offering voice, video and internet in Pune and Chennai initially, and then
Kolkata and Bangalore. BSNL's focus on its broadband offering, it hopes, will
offset falling fixed-line voice revenues (and, indeed, a faltering mobile
service). In January 2009, BSNL announced a major thrust for the deployment of
its IPTV service portfolio. The company plans to launch services in 93 cities
in 2009. Kuldeep Goyal, chair and managing director of BSNL, said that his
company is looking at IPTV as a 'major value addition' that can be offered to
the operator's fixed-line subscribers. BSNL is looking to have a subscriber
base of about 2mn by the end of its next financial year (March 2010).
Meanwhile,
BSNL is looking to offer two WiMAX tenders with an aggregate value of US$1bn;
the tender will be split between rural India (funded by USOF) and an urban
network (funded by BSNL). The project featured a plan to offer broadband
connections through its WiMAX network in 40,000 schools by 2008 (latest
available data). Soma Networks will deploy BSNL's WiMAX network across Gujarat,
Maharashtra, Goa and Andhra Pradesh, with the network set to provide broadband
data and voice services to an area reaching more than 200mn people.
Five
companies approached BSNL in December 2009 to provide its WiMAX service on a
franchisee basis. The companies -- Adishwar India, Ampouls, Teracom, E-mall Infotech
and Tech Solutions -- had a minimum turnover of INR1bn (US$21.5mn) in the last
two fiscal years, which qualifies them for the tender, according to bidding
rules.
BSNL
unveiled a new VDSL-based broadband service in February 2010 that provides the
fastest speeds in the country. The service launched by the operator will enable
subscribers to enjoy broadband connection with the highest download speed of up
to 24Mbps at a monthly tariff of INR9,999 (US$216.4). In addition, a slower
speed connection offering up to 16Mbps will be available at a monthly price of
INR4,999 (US$108.19).
Furthermore,
the operator plans to roll out its gigabit-capable passive optical network
(GPON) in the Vijayawada district of the state of Andhra Pradesh in India,
reports The Hindu. The network will enable the operator to introduce
high-speed broadband services offering speeds of up to 8Mbps. BSNL also stated
that it has procured the necessary equipment for launching a gigabit ethernet
passive optical network (GEPON) in rural regions of the district. The operator
plans to launch its GEPON services by the end of March 2010.
Strategy
One
of BSNL's stated objectives is to become the largest telecoms service provider
in Asia. As a state-owned operator, BSNL seeks to facilitate R&D activity
in India. It also aims to contribute to the government's national plan target
of 500mn mobile subscribers by 2010, as well as the achievement of 20mn
broadband customers by 2010 (as per the Broadband Policy 2004). Other BSNL
goals that are connected to government policy include the provision of
telephone connectivity in villages and the implementation of triple-play
services.
In
order to achieve this, at a time when its profits are in decline due to
competitively priced tariffs, the operator is increasingly looking towards
infrastructure sharing. BSNL has the advantage of having a strong rural
infrastructure compared to private operators and hopes to generate revenue from
sharing both passive and active networks. It has signed an agreement with Aircel
in October 2009 and with Sistema Shyam TeleServices in November 2009.
In
addition to its network development plans within India, BSNL is actively
looking to expand internationally, in a strategy that could result in operator
acquisitions in Africa and the Middle East. Although no specific countries have
been mentioned, it is rumoured that possible targets may include Egypt, Rwanda,
Malawi, Turkey and Iran. BSNL is also part of a consortium of seven companies,
Europe India Gateway (EIG), which will invest approximately US$50mn in an
undersea cable link in the Atlantic. Together with fellow state-run operator,
MTNL, BSNL is also involved in a separate joint venture, Millennium Telecom,
which will lay two further undersea cable links to the east and west.