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BSNL: Bigger and Better - BSNL aims for greater growth and expansion

April 15, 2005
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For a company that has the seventh argest telecom network in the world, Bharat Sanchar Nigam Limited (BSNL) is on track to become even bigger and better. It has announced an investment of Rs 750 billion over the next three years and plans to cater to a subscriber base of 125 million. Though these targets are high, BSNL hopes to meet them in order to make its vision of becoming the largest telecom company in Southeast Asia a reality.

The company has strong financials to back up its ambitious plans. In fact, it claims to be India's largest profit-making corporation outside the oil PSUs. According to company officials, the annual revenue for 2004-05 is expected to be to the tune of Rs 350 billion. In the previous year, it stood at Rs 310 billion when the company had a net worth of over Rs 630 billion.

As far as profits are concerned, BSNL has announced that it hopes to rake in profits of about Rs 70 billion in 2004-05. These figures are considerably higher than 2003-04 when the PSU saw Rs 59.72 billion in profits. Overall, the company has seen a compounded annual growth rate of 9 per cent over the last five years.

The company has announced plans to invest Rs 250 billion per year over the next three years. This amount is significantly higher than the Rs 90 billion and Rs 65.23 billion it invested in 2004-05 and 2003-04 respectively.

The year 2004-05 marks a reversal of the investment trend that BSNL had witnessed between 2001 and 2004. The period 2001-04 saw a decrease in investment activity. For instance, while Rs 170 billion was invested in 2001-02, this figure came down to Rs 120 billion and Rs 65 billion in 2002-03 and 2003-04. The recent focus on investment marks a new phase of growth.

Currently, BSNL has a fixed line subscriber base of 35.6 million and a mobile subscriber base of over 9.4 million. As the incumbent player, it has the advantage of having a fixed line network that, according to the company, provides 100 per cent coverage at the district and tehsil levels. It also claims to cover 92 per cent of the villages across the country. Its extensive network, especially in rural areas, has given BSNL the advantage of enjoying last mile connectivity. As the broadband revolution takes off in the country, this is going to be one of its most valuable resources.

Since the launch of its broadband Dataone services in January this year, BSNL has started offering services in 32 cities. It is already providing 33,500 customers with services against a total of 175,000 who have registered. The company plans to make these services available in 198 cities by May 2005. Though BSNL has only recently started broadband services, it currently enjoys the largest internet subscriber base. It has over 1.8 billion subscribers to its Sancharnet internet service.

Another arena where the company has witnessed tremendous growth is the cellular segment. The company has added 601,000 new customers in March 2005. During the last financial year, 2004-05, it has seen a growth of more than 78 per cent in its subscriber base. According to recent reports, BSNL is planning to float a tender for 40 million lines, with a preference for vendors with production facilities in India. At an average of Rs 3,000 per line, the total size of the order may be as high as Rs 120 billion.

BSNL seems to be on the right track. It has the advantage of having the most extensive network which allows it to provide connectivity to most parts of the country. In fact, according to N.K. Mangla, director, BSNL, "Despite being the last player to enter the mobile sector, our network is available in most parts of the country. This is our unique selling point.

However, the company faces certain issues which need to be dealt with. In the fixed line segment, the company has been losing subscribers lately. This is the result of competition from fixed line services being provided by private players. BSNL also has a long waiting list of customers. Of course, as S.D. Saxena, director, finance of BSNL says, most private players do not have waiting lists and hence this may or may not be reflective of the true picture.

There has also been some delay in procurement of necessary materials to meet targets. The company admits that though it has added about 4.2 million new subscribers in 2004-05, its plans to achieve nearly 7 million net additions did not materialise because of procurement delays. Procurement problems need to be addressed if the huge targets that BSNL has set before it have to be met on time.

BSNL is also keen to change its image from a bureaucratic outfit to a company that is efficient and customer oriented. In a telling sign of change, the company's director, finance recently put aside finance concerns to make a presentation on BSNL's work in the aftermath of the tsunami in the Andaman & Nicobar Islands. He was keen to show the "human side of BSNL". The idea clearly is to make BSNL not just bigger but better also.

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