BSNL mulls IPO, 33% market share by 20104 min read . Updated: 08 Nov 2007, 12:19 AM IST
BSNL mulls IPO, 33% market share by 2010
BSNL mulls IPO, 33% market share by 2010
New Delhi: The top management at state-owned Bharat Sanchar Nigam Ltd, or BSNL, India’s biggest phone company by revenues, favours a listing of its shares through an initial public offering (IPO) as a means to benchmark itself against private sector telcos, usher in transparency into its operations and help it become more efficient.
“If a part of your equity is listed, then everyone monitors your health," Kuldeep Goyal, chairman and managing director of BSNL, said in an interview. “From that angle, I feel there is time to consider that (an IPO), but it depends on the government and employees."
Bharti Airtel Ltd and Reliance Communications Ltd, or RCom, India’s top two mobile phone service firms, enjoy a market cap of $43.5 billion and $38 billion, respectively.
The New Delhi-based BSNL, which has been losing market share in recent years to Bharti Airtel and RCom, has put in place an ambitious plan to garner one-third of the Indian telecom market by users in 2010, by when the fourth largest economy in Asia is predicted to have some 500 million telephone customers.
“We will be investing Rs15,000 crore this year, and Rs20,000 crore each year for the next three years as we expand our mobile networks and also introduce new services such as IPTV," said Goyal.
IPTV is short for Internet protocol television, a technology that helps deliver television signals through an Internet connection.
BSNL already accounts for more than 25% of fixed line and mobile phones used in India, but nearly half of this comes from its 33 million-strong fixed line phone customers—a base that is slowly shrinking. All its growth in future then will have to come from mobile phone customers.
India’s telecom regulator, the Telecom Regulatory Authority of India, or Trai, said in October that BSNL’s share of the fast growing mobile telephony market was around 17.24% by subscriber numbers, while Bharti Airtel and RCom accounted for 23.9% and 17.3%, respectively.
Home to more than 200 million mobile phone customers, India is the fastest growing wireless market in the world, adding up to eight million customers a month.
Analysts believe a public listing would help BSNL garner more resources for the kind of growth its management is aiming to achieve. “They are talking about adding three million connections every month for the next three years, at a time when Bharti is adding around two million every month," said Yogesh Kirve, a telecom analyst at Anand Rathi Securities Ltd. “A public listing will bring more accountability and efficiency," he added.
In what could further help BSNL boost its share of the Indian mobile market, the company plans to formalize plans to offer phone services through CDMA (short for code division multiple access) technology in a month’s time. “CDMA mobility would help us penetrate areas where there is no GSM network, so it would help as a fallback strategy," said Goyal.
“Moreover, with CDMA, you do not need to migrate to 3G for offering high speed data transfer, which is the case if you are using GSM."
BSNL currently offers mobile services on the dominant GSM platform and uses CDMA in a limited way for last-mile access, especially in rural areas.
To add another 100 million connections by 2010, BSNL will need to work on a decision making process and timely procurement of equipment for rolling out mobile and fixed line networks in the country’s rural areas.
“BSNL has got around 30,000 towers and we would need to add around 25,000 to 30,000 towers within a year or so, and probably keep adding the same number each year for a couple of years," said Goyal.
In order to become more focused on its core competencies and shed non-core areas of business, “BSNL is examining (a proposal) to float a separate infrastructure company, which will focus on establishing and maintaining telecom towers," Goyal added. Private sector rivals Bharti Airtel and RCom have already floated their tower subsidiaries.
“All other players such as Reliance have got good valuations for their tower companies, so we are considering whether to have a separate company," the BSNL chairman said.
Hiving off its tower business could just be the beginning, with BSNL also looking to outsource more activities to experts. “What we cannot do on our own should be outsourced," said Goyal. “We are reviewing if we should outsource more activities such as maintenance of mobile networks and broadband connections," he added.
Even as BSNL prepares to increase its share of the wireless market, the company views growing landline phone subscriber base as an effective strategy. “If you look at mobile calls, 60% of the traffic is within premises, and voice quality of landline would be much better in these cases when compared to mobile voice quality," said Goyal.
But for customers who are now used to the benefits of phonebook and caller line identification, switching to fixed line could still be a tough task. “With more facilities bundled with fixed phones, cheaper call rates and better voice quality, I hope to attract more people back to wire line connections," Goyal said, adding that BSNL plans to procure new fixed phones that come with a phonebook and other facilities.
What could aid fixed line growth is the increasing penetration of broadband connections, which allow customers to access the Internet at relatively higher speeds. “We believe broadband will help turn it around, and we aim to have around 10 million broadband connections by 2010," said Goyal. The company currently has around 1.15 million broadband customers. The government has set a target of 20 million broadband connections by 2010. In a bid to streamline BSNL’s operations with state-run and New York Stock Exchange-listed Mahanagar Telephone Nigam Ltd, or MTNL, “we would be signing an MoU (memorandum of understanding) with MTNL very soon", said Goyal, declining further detail. MTNL, which operates in Mumbai and New Delhi, has around 2.7 million fixed line phone users, while BSNL has almost 31 million wireless customers.