|Prithipal Singh, CMD, BSNL: Will he have
the last laugh?
a sleepy Monday afternoon, but Manoj Gupta is anything but yawning.
The sole franchisee for Bharat Sanchar Nigam Ltd's (BSNL) mobile
service CellOne in Lucknow, Gupta is busy chatting up customers
in his swanky outlet at the Tej Kumar Plaza. Just like BSNL's prepaid
mobile shop a little distance away, he isn't making any sale, though.
Reason: There are no connections to sell. The network capacity,
explains Gupta, is exhausted.
In contrast, the Reliance Mobile sales outlet
across that of Gupta's has connections on offer. But few customers
are to be seen in the shop. A bad day for Reliance? May be, but
its franchisees like Om Overseas Communications-the one across Gupta's-must
be hoping that it doesn't become the norm. After all, they have
reason to feel nervous.
Barely four months ago-October 19, 2002 to
be precise-the state-owned telecom giant launched its mobile service
in the historic city, offering the first connection to Prime Minister
Atal Bihari Vajpayee. The telco had envisioned an initial demand
of 8,000 for Lucknow. But the number has already crossed 25,000.
No doubt, closure of the ailing Koshika telecom in the state helped
BSNL. But that hardly explains the success CellOne has met with
in other parts of the country, racking up over 1.5 million subscribers
since the launch. Translate that into marketshare, you get 13 per
cent for BSNL against Bharti Cellular's 26 per cent, Hutch's 18
per cent, and 11 per cent of Idea.
Buoyed by the success, BSNL's Chairman and
Managing Director, Prithipal Singh, has already started planning
for the next phase of expansion, which would double capacity to
eight million. Market watchers say that BSNL's numbers are routed
to the basics-aggressive tariffs and expansive coverage. The pious
Singh, however, puts it down to the faith of the people in the company.
"People have faith in public sector institutions.
| BSNL's Pluses...
can beat the lure of low prices. BSNL is, and is perceived to
be, the lowest-priced operator in most states.|
With points of
presence not limited to the main cities, it has managed to tap
clients in smaller towns where it is the only service provider
of presence means that all calls within a telecom circle, from
fixed or mobile phones, are local. Word-of-mouth has ensured
that this is a big selling point.
Believe it or not,
there are people out there who have faith in things sarkari.
At least, it will not shut down and run away with money (Think
combined packaging of fixed, mobile, long-distance and internet
services cannot be matched easily.
| ...And Its Minuses
average revenue per user (ARPU) for BSNL is lower than the industry
average since low-end users form the mass of its subscribers|
Bharti, Idea and Hutch graduate to 2.5G (multi-media messaging,
always-on internet), BSNL's value-added offering is limited
to SMS. This could be a handicap in the near future.
Low tariffs can
be matched and multiple points of presence can be established
by competitors. Relaxation of the FDI limit will ensure that
others have deep pockets too.
Has always been
a weak point for BSNL and could be a put-off for the high-end
While BSNL is benefiting
from the churn (from other operators) now, the inevitable reverse-churn
could see subscriber additions tapering off.
We will not fleece the consumer," he says.
Not surprisingly, BSNL has replaced Reliance
Mobile as the hot topic of discussion in the cellular camp. And
they are not merely accusing it of predatory and unfair pricing.
"They are using the incumbency advantage that is anti-competitive.
It is severely impacting the market of the private operators,"
says an irked Director General of the Cellular Operators' Association
of India, T.V. Ramachandran. And where is Reliance Mobile? Well,
it is planning to commercially launch service in 104 cities across
the country on April 1, the day when the new interconnect regime
comes into effect.
The only thing a prospective subscriber is
promised is Rs 0.40 per minute charge if calling within the Reliance
network. The average consumer is confused about the other call charges.
Then, factor in the huge entry cost (for handset and subscription)
and you would know why BSNL is making waves in a price-sensitive
India. "I don't know what I will get from Reliance. I decided
not to wait for it and opted for the only service provider here-BSNL,"
says Ajit Pratap Singh, the Development Officer at village Bhandua
Thukran, about 70 kilometre away from Lucknow in Barabanki. It is
his personal connection. To its credit, BSNL has managed to snatch
the first-mover's advantage even in states where it has entered
as the fourth operator.
The question for Singh, however, is BSNL's trajectory
sustainable? Analysts cite empirical data to show that the high-growth
trajectory tends to fall to a lower level in each following month
after launch. Why does it happen? Reverse-churn. Dissatisfaction
with the service. Bill-shock (yes, it still happens). Take the case
of Bharti Cellular, which made its debut in Mumbai in late July
last year and totted up 93,594 subscribers by the end of August.
In September, it added 42,080 subscribers, 41,729 in October, 21,878
in November, 13,023 in December, and 8,071 in January 2003. Idea
Cellular in Delhi added 13,936 subscribers in January 2003 against
52,922 in December last year.
It is the same pattern in the states. Shrugging
off the numbers, Bharti's Chairman and Group Managing Director Sunil
Bharti Mittal says that there was "nothing unusual" in
BSNL numbers. "We have also picked up 50-60 per cent marketshare
when we launched in new states," he says. However, since BSNL
is launching in new cities every day, the initial momentum is likely
to be sustained over a longer period than average, says KPMG's Executive
Director Rothin Bhattacharya.
Another factor working to BSNL's advantage
is that competitors seem to be in no rush to match its tariffs or
coverage. What BSNL needs to worry about is how to sustain this
growth. With the latent demand in the smaller cities now becoming
apparent, it is only a matter of time before the private operators
go cherry-picking the tree planted by BSNL. The fickle pre-paid
subscribers (about 55 per cent of BSNL's base) are especially prone
to churn. The relaxation of FDI limits will ensure that the private
operators not only have the will, but also the ability to take BSNL
As for the myth of private sector services
being of superior quality, the telecom regulator's latest quality
of service audit (done by IMRB) has managed to dilute that perception
significantly. Since the survey pertains to the period October 2001-June
2002, it does not rate BSNL's cellular service (which was launched
only in October 2002), though the company makes impressive innings
on the quality of its basic service in some states. In Andhra Pradesh,
for example, BSNL scored 92.7 per cent on customer satisfaction
while Tata Teleservices notched up 83.7 per cent.
|"We have also
picked up 50-60 per cent marketshare when we launched in new
Sunil Mittal, CMD, Bharti Group
Fear The Competition
The private operators maintain that the game
is not all about tariffs, in the long run. "It is about service.
Customer service. Value-added services and network coverage. We
are plus-plus on that," says Bharti's Joint President (Mobility),
Manoj Kohli, hinting that the numbers could throw up some surprises
in the next few months with the tweaking of tariffs announced earlier
this month by the group. Says Gartner's telecom analyst Kobita Desai:
"The pressure will mount for BSNL as it increases footprint
in larger cities and towns where incumbents are well entrenched."
Meanwhile, Reliance is rejig-ging its sales
strategy to start over-the-counter sales of handsets and subscriptions
(against the current wait of about a fortnight). Capacity on date:
12 million. Though the company was unwilling to share numbers, spokesperson
for Reliance Infocomm, Amit Khanna, maintained that the response
had been better than expected with several "hundreds of thousands"
having paid for it. Long-distance services, national and international,
are also to be launched simultaneously. "There is a certain
value-proposition in the Reliance offering that would especially
appeal to Corporate India. They could still surprise everyone,"
says telecom analyst at Enam Securities, Ram Hegde.
Gartner research shows that Indian enterprises
are becoming early adopters of wireless data technology in relation
to peers in the Asia-Pacific region. "CDMA could be a good
option for mobilising the enterprises looking beyond voice services,"
says Desai. Reliance could still kink the BSNL growth curve, which
will be subject to a southward drag from the other private sector
operators as they strategise to gradually chip away BSNL's subscriber
base to get a larger share of the mobile market, projected to grow
to Rs 25,000 crore by 2007 (CDMA and GSM) against Rs 5,000 crore
Meanwhile, Gupta of Lucknow is asking for a
quick release of the next round of connections from BSNL officials.
He has got prospects clamouring for phones. There are whispers of
black marketing. The Vice Chancellor of Ambedkar University calls
up BSNL's Chief General Manager V.K. Shukla for an out-of-turn CellOne
connection, as do sundry friends and relatives of those with the
power to dish out CellOne and Excel. For now, Singh is sitting pretty.
But tomorrow is another day.