Delhi MCD Election Results 2017

Source: media reports

BSNL to farm out tower, fibre upkeep

BSNL to farm out tower, fibre upkeep
Comment E-mail Print Share
First Published: Sun, Sep 27 2009. 11 50 PM IST

Lowering costs: Kuldeep Goyal of BSNL said the telco will soon seek expressions of interest from firms. Harikrishna Katragadda/Mint
Lowering costs: Kuldeep Goyal of BSNL said the telco will soon seek expressions of interest from firms. Harikrishna Katragadda/Mint
Updated: Sun, Sep 27 2009. 11 50 PM IST
New Delhi: State-controlled phone company Bharat Sanchar Nigam Ltd (BSNL) plans to outsource management and maintenance of so-called passive infrastructure such as its optical fibre cable network and telecom towers, opening up a potentially lucrative business opportunity for companies such as Nokia Siemens Networks.
BSNL plans to seek expressions of interest (EoIs) shortly from companies that manage telecom networks, chairman and managing director Kuldeep Goyal said. Seeking EoIs marks the first step in the process of awarding contracts.
Lowering costs: Kuldeep Goyal of BSNL said the telco will soon seek expressions of interest from firms. Harikrishna Katragadda/Mint
The company has a presence in 22 telecom operating areas in the country. BSNL plans to farm out the infrastructure management and maintenance work through separate contracts, Goyal said in an interview.
BSNL will join private sector rivals such as Bharti Airtel Ltd that have outsourced large parts of their operations, including infrastructure and network management and maintenance, in an attempt to lower costs in a market where the average revenue per user, or Arpu, is well below $7 (Rs336) a month, half of what it is in developed countries, as competition forces telecom companies to cut tariffs and boost market share.
The outsourcing deal could mean a business opportunity worth well above $1 billion for network management firms such as Nokia Siemens Networks, Ericsson AB and Alcatel Lucent SA that manage the networks of Bharti Airtel and Reliance Communications Ltd, analysts say.
BSNL has the largest optical fibre cable network in the country, comprising at least 600,000 route kilometres covering all state capitals and district headquarters. The firm also operates around 42,000 telecom towers.
In terms of size, BSNL’s optical fibre cable network outstrips Bharti Airtel’s and Reliance Communications’ combined.
Bharti Airtel’s optical fibre cable network spans 100,000 route kilometres, covering all the major cities in the country. Indus Towers Ltd, a joint venture involving Bharti Airtel, Vodafone Essar Ltd and Idea Cellular Ltd, is the largest tower firm in the country with at least 100,000 towers.
Reliance Communications has around 190,000 route kilometres of optic fibre cable, and it also operates 50,000 towers.
Ericsson manages Bharti’s networks in 15 mobile service areas while the rest is handled by Nokia Siemens Networks. Bharti has signed four major network outsourcing deals with Ericsson in the past five years since a $400 million deal in February 2004. The latest contract awarded in mid-2007 was valued at $2 billion.
Bharti has also signed four network outsourcing agreements with Nokia Siemens Networks beginning May 2004, when it signed a three-year, $275 million deal to build and manage networks across five operating areas. The last in the series of contracts was a $900 million deal signed in 2007 that went beyond mere network expansion.
For BSNL, outsourcing the management of its passive infrastructure also has far-reaching consequences on other aspects of the state-owned telecom operator because at least 40% of the firm’s nearly 300,000 employees are involved in the maintenance of infrastructure.
“Many of the junior employees have been moved into the newly created sales and marketing division of BSNL as part of the ongoing restructuring,” said a senior executive from BSNL who didn’t want to be named because he isn’t authorized to speak to the media. “We are training them and improving our sales and marketing, which was a major weakness of the company.”
The outsourcing plan follows a report submitted in December by Boston Consulting Group, which was hired to study the operations of BSNL and advise the phone company on how to restructure its operations to compete better with private sector rivals.
In the year to March, BSNL fell to second place behind Bharti in terms of revenue. Bharti logged Rs37,000 crore of revenue against BSNL’s Rs35,000 crore.
Bharti Airtel has already outsourced its intra-city optical fibre network to a 26:74 joint venture, in which it is the minority partner with Alcatel Lucent.
Under this deal, Bharti is paying the joint venture company around $500 million over a five-year period for managing its landline and broadband business in about 100 cities for the next five years.
The country’s largest telco is also looking at outsourcing around 80,000km of its inter-city optic fibre network in a deal that is estimated at upwards of $500 million.
“It is a massive deal and in terms of a business opportunity it is a very good move for BSNL,” said B.K. Syngal, senior principal, Dua Consulting Pvt. Ltd, and former head of Videsh Sanchar Nigam Ltd.
“It is high time they unlock the value in the massive amounts of assets they have in the OFC (optic fibre cable network) and the towers which are not being optimally used at present,” Syngal added.
“This move would enable them to concentrate on sales and marketing of their core business as well as use of these assets, which are badly needed by many of the other operators.”
The companies that are awarded the maintenance contracts will need workers who can be provided by BSNL from its large pool of skilled employees.
“Most of the private companies have hired their core teams from the PSUs (public sector undertakings),” Syngal said. “They can negotiate with the company, which will mitigate the impact on the employees to a large extent.”
Comment E-mail Print Share
First Published: Sun, Sep 27 2009. 11 50 PM IST