Corporate: BSES' Gigabyte Dreams

NEW ECONOMY
BSES' Gigabyte Dreams

What explains Anil Ambani's enthusiasm for BSES? The answer could lie in the emerging synergy between the ICE plans of BSES and Reliance.

By Brian Carvalho

The reason Reliance is so keen on BSES is:

The Rs 2,430-crore distributor and generator of power has an exclusive licence to distribute power in north Mumbai up to 2011, through which it reaches into two million households.

BSES is putting up power plants in Andhra Pradesh and Kerala (via the joint venture route).

Having taken over three distribution companies in Orissa, BSES is supplying electricity to one million households in that state.

BSES has a fledgling subsidiary, BSES TeleCom.

The right answer could be any one of these choices. But chances are that you would plump for any of the first three, preferring to ignore the fourth alternative. After all, what's so special about a telecom subsidiary that today barely has any operations worth talking about?

A lot, actually. Ask Reliance Industries Managing Director, Anil Ambani, he'll tell you. At a press conference last fortnight, where he announced his company's quarterly report card, Ambani termed BSES a ''value proposition'' thanks to its two-million household network in Mumbai, and a million household reach in Orissa. So are the Ambanis-who, via Reliance Power, run huge captive power units at their petrochemical and refinery units-thinking of exploiting BSES' network to distribute electricity? Maybe, maybe not. But one thing's for sure: Reliance will be looking to exploit BSES' distribution network to provide high-bandwidth Net access.

Grand ICE plans

To get a clearer picture, you have to take a look at the individual plans of BSES and Reliance for the ice sector. Reliance is floating a new company-Reliance Infocom-which will be investing over Rs 15,000 crore in the ice sector. These include plans to lay fibre-optic cable networks for providing broadband Net access in all of 115 cities.

Now cut to BSES' Net game plan. BSES TeleCom is investing Rs 300 crore over the next three years for providing Net access, setting up portals, and for providing E-commerce and value-added services. The wholly-owned subsidiary (equity base: Rs 60 crore) has a category 'a' ISP licence, which allows it to provide Net access all over India. But it is in Mumbai that the subsidiary is flagging off its operations by laying 1,000 km of optic fibre cables. BSES' edge here is that it already has a ready network in place by virtue of being the sole supplier of electricity to north Mumbai. Says BSES TeleCom CEO D.K. Nimal, 48: ''We already have the right of way, which makes our task of laying optic fibres much easier and cheaper.'' And BSES is already physically wired up at the consumer end (the last mile).

Nimal knows what it's like to depend on the dot. After all, he was part of the core team at VSNL when it flagged off its Net operations. Nimal, who had resigned from VSNL only last month, would also be aware of the constraints of the dial-up process, which, at best, can provide a bandwidth of 56 kbps. And during the high-traffic hours, 9-10 kbps is all you can hope for.

With the BSES TeleCom network, consumers will get bandwidth of between 64 kbps and two megabits. The company is putting up a Ku-band satellite gateway which will be able to provide 100-120 megabits of bandwidth for this purpose. That's not all. With submarine gateways out of VSNL's sole purview, Nimal doesn't rule out tying up with a couple of other players to set up one such gateway. The advantage: a submarine gateway can provide as much as 80 gigabytes of bandwidth.

Higher bandwidth-at low charges-is indeed BSES TeleCom's USP. Nimal has broken down the market into three segments: home users, who make up 80 per cent of the total pie, will get 64 kbps at Rs 500 per month. But it's the corporates-whose bandwidth requirements are larger-who will account for 70 per cent of BSES TeleCom's revenues. They account for only five per cent of the market (the rest is accounted for by small and medium-scale enterprises), but BSES plans to charge them Rs 15,000 a month for a 256 kbps connection. By December 2001 BSES TeleCom hopes to rope in one lakh customers. By March 2002, its revenues are expected to hit Rs 200 crore. And the company hopes to break even in the third year.

The Stumbling Blocks

There are some potential stumbling blocks, though. One, as Amitabh Kumar, Director (Operations), VSNL, points out: ''BSES has a great advantage of reaching consumers, but the question is: will they be ready to fork out Rs 500 per month just for Net access, when cable operators will be attempting to bundle Net access along with television channels for a similar price?''

Nimal is ready for that one. Realising that plain vanilla ISPs will not survive by just doling out access, he plans to make use of the higher bandwidth to offer value-added services like video conferencing, video streaming, e-education, e-commerce, and tele-medicine. ''And if Net telephony opens up, we will be there too,'' says Nimal.

The second stumbling block: BSES distributes electricity only in north Mumbai, with the Brihanmumbai Electric Supply & Transport Undertaking (BEST) handling the south, including Nariman Point which is the business district. How then will BSES wire corporates? BT learns that BSES is discussing an alliance with best. But Nimal isn't relying only on that. He's also talking to smaller cable operators to wire homes in areas where BSES does not have a presence at present.

Of course, the billion rupee question is how BSES TeleCom will make full use of its category 'a' licence? After all, it's only in Mumbai and Orissa (where pc penetration is anyway abysmally low) that BSES has a 'right of way'. Perhaps the Ambanis might have an answer.

Issue Contents Write to us Subscriptions Syndication