Financial Express, Column
G Krishna Kumar, V Sridhar | Updated: Mar 09 2011, 23:48 IST
It is to be applauded that on the first day of Apple’s iPad launch in India, BSNL announced a special data plan to support iPad users. Such promptness by the state-owned operator was never heard of before. However, BSNL is facing stiff competition, especially with the famous ‘paisafication’ of tariff started by the new generation private operators. BSNL, currently the 4th largest operator, could soon see itself dropping a few positions with the private operators starting 3G services and with mobile number portability kicking in. BSNL incurred a loss of over R1,800 crore during 2010. The recent CAG probe into BSNL’s WiMax franchisee arrangements is the proverbial last straw on, this time, the withering elephant’s back. What has gone wrong with BSNL and what needs to be done to revive the sagging telco?
BSNL (as well as MTNL) was allotted spectrum for 3G and Broadband Wireless Access (BWA) services in early 2009 and had an absolute lead of 2 years over the other telcos. While the private telcos, owing to an intense price war, could not bid in both 3G and BWA auctions for a pan-India presence, BSNL had the privilege of pan-India presence (barring Delhi and Mumbai, which are the territories of MTNL). It is quite unfortunate that BSNL has not been able to make a major impact in wireless broadband services, thus far. Over the past almost 2 years, BSNL has managed to add only about 2 million 3G subscribers.
BSNL entered into 2G services with very aggressive pricing in 2002. Within 1 year of its launch, it amassed a subscriber base of 4 million—a performance never heard of before from a state-owned telco. Currently, the CAGR of its 2G subscribers is far less than that of its competitors.
The same strategy, based on price, was followed for the 3G launch as well. However, to its dismay, history could not be repeated, even during the first couple of years of the launch. Apart from low prices, did BSNL create market awareness about its 3G service? Definitely, yes. By roping in some of biggest Bollywood stars and notable athletes of the current generation as its brand ambassadors, BSNL caught the attention of most of the potential 3G adopters. But this potential could not be converted into reality, thanks to its perceived brand image of ‘poor service quality’, especially among urban customers who were likely to be the potential early adopters of 3G. Similar to the other major telcos, two-thirds of BSNL’s subscriber base belongs to the urban segment. To a large extent, the youth and the working class urban population are mobile data ‘aware’. But BSNL has not been able to provide enough simple, meaningful and user-friendly India-specific applications. Early adopters of 3G were obviously looking for a better user experience, customer service and wider array of service offerings rather than plain wireless Internet services. In the early evolution of a technology or a service, network effect is more than the price effect. Early adopters are relatively price-inelastic and would like to get more network value. An example of this is if a user wants to use video calling, she would like to have her partner also use 3G and an appropriate handset. What BSNL failed to do in the early stages is to create the critical mass required for the network effect to spiral growth. We outline below a three-pronged strategy for the revival of BSNL.
In today’s intensely competitive mobile services space in India, it is not only the price that matters! Also important is the alacrity with which the operator makes decisions about purchasing equipment, deploying networks and improving perceptions about a customer-centric operator. No to mention the flexibility to participate in co-operative (collaborative and yet competitive) agreements with other operators and firms to use assets optimally.
BSNL has a perpetual problem in improving its infrastructure, thanks to a tedious tendering and contracting process. BSNL’s recent guideline of allowing only equipment vendors willing to submit their source code to be eligible for bidding has further complicated the bidding process and added delays. The infamous 93-million-line GSM tender was cancelled due to excessive restrictions in the bidding process, and incessant political and bureaucratic intervention. Competitors of BSNL are way ahead in vendor management practices, incorporating fully outsourced models and technology derisking. BSNL should implement best practices in the industry for vendor management to survive in the market.
Although the latest Trai report on performance indicators shows BSNL above the benchmark (on both network quality of service and customer-related parameters) in almost all the circles barring a few such as Madhya Pradesh and the Northeast, BSNL should strive to improve the perception of customer-centricity among urban customers. Large-scale training in customer relationship management to the marketing, sales and service support staff is the need of the hour.
BSNL has been using various business models to better market its 3G and BWA services. The revenue-sharing franchisee model adopted for its BWA services was the first step by BSNL toward this effort. But BSNL’s offer to share its network for inter-circle roaming arrangements with private telcos received a cold response as it was found to be an expensive revenue-sharing proposition and hence unattractive. If the price is right, BSNL’s similar offers on passive infrastructure and tower sharing, or wired local loop sharing using the ‘collaborate and compete’ philosophy, might yield positive results.
BSNL’s difficulties in reaching 3G to the rural subscribers, despite low price plans, is due to lack of m-awareness of consumers and unavailability of subsidised phones. BSNL should embark on a mission to rapidly increase m-awareness among the rural populace. Bundled handsets with attractive contract terms are one of the ways by which the huge pre-paid segment can potentially be converted into a post-paid segment in rural areas.
Kapil Sibal can also help by freeing up the bureaucratic hurdles and giving appropriate powers to the top management of BSNL to make quick decisions so that the elephant can dance to the tunes of the market. This is imperative, especially when the minister is thinking of making the elephant bigger by merging it with MTNL! It is imperative that the ministry appoints a permanent CMD for BSNL soon so that strategic directives can be implemented.
The authors are telecom professionals based in Bangalore.
Views are personal
G Krishna Kumar, V Sridhar | Updated: Mar 09 2011, 23:48 IST
It is to be applauded that on the first day of Apple’s iPad launch in India, BSNL announced a special data plan to support iPad users. Such promptness by the state-owned operator was never heard of before. However, BSNL is facing stiff competition, especially with the famous ‘paisafication’ of tariff started by the new generation private operators. BSNL, currently the 4th largest operator, could soon see itself dropping a few positions with the private operators starting 3G services and with mobile number portability kicking in. BSNL incurred a loss of over R1,800 crore during 2010. The recent CAG probe into BSNL’s WiMax franchisee arrangements is the proverbial last straw on, this time, the withering elephant’s back. What has gone wrong with BSNL and what needs to be done to revive the sagging telco?
BSNL (as well as MTNL) was allotted spectrum for 3G and Broadband Wireless Access (BWA) services in early 2009 and had an absolute lead of 2 years over the other telcos. While the private telcos, owing to an intense price war, could not bid in both 3G and BWA auctions for a pan-India presence, BSNL had the privilege of pan-India presence (barring Delhi and Mumbai, which are the territories of MTNL). It is quite unfortunate that BSNL has not been able to make a major impact in wireless broadband services, thus far. Over the past almost 2 years, BSNL has managed to add only about 2 million 3G subscribers.
BSNL entered into 2G services with very aggressive pricing in 2002. Within 1 year of its launch, it amassed a subscriber base of 4 million—a performance never heard of before from a state-owned telco. Currently, the CAGR of its 2G subscribers is far less than that of its competitors.
The same strategy, based on price, was followed for the 3G launch as well. However, to its dismay, history could not be repeated, even during the first couple of years of the launch. Apart from low prices, did BSNL create market awareness about its 3G service? Definitely, yes. By roping in some of biggest Bollywood stars and notable athletes of the current generation as its brand ambassadors, BSNL caught the attention of most of the potential 3G adopters. But this potential could not be converted into reality, thanks to its perceived brand image of ‘poor service quality’, especially among urban customers who were likely to be the potential early adopters of 3G. Similar to the other major telcos, two-thirds of BSNL’s subscriber base belongs to the urban segment. To a large extent, the youth and the working class urban population are mobile data ‘aware’. But BSNL has not been able to provide enough simple, meaningful and user-friendly India-specific applications. Early adopters of 3G were obviously looking for a better user experience, customer service and wider array of service offerings rather than plain wireless Internet services. In the early evolution of a technology or a service, network effect is more than the price effect. Early adopters are relatively price-inelastic and would like to get more network value. An example of this is if a user wants to use video calling, she would like to have her partner also use 3G and an appropriate handset. What BSNL failed to do in the early stages is to create the critical mass required for the network effect to spiral growth. We outline below a three-pronged strategy for the revival of BSNL.
In today’s intensely competitive mobile services space in India, it is not only the price that matters! Also important is the alacrity with which the operator makes decisions about purchasing equipment, deploying networks and improving perceptions about a customer-centric operator. No to mention the flexibility to participate in co-operative (collaborative and yet competitive) agreements with other operators and firms to use assets optimally.
BSNL has a perpetual problem in improving its infrastructure, thanks to a tedious tendering and contracting process. BSNL’s recent guideline of allowing only equipment vendors willing to submit their source code to be eligible for bidding has further complicated the bidding process and added delays. The infamous 93-million-line GSM tender was cancelled due to excessive restrictions in the bidding process, and incessant political and bureaucratic intervention. Competitors of BSNL are way ahead in vendor management practices, incorporating fully outsourced models and technology derisking. BSNL should implement best practices in the industry for vendor management to survive in the market.
Although the latest Trai report on performance indicators shows BSNL above the benchmark (on both network quality of service and customer-related parameters) in almost all the circles barring a few such as Madhya Pradesh and the Northeast, BSNL should strive to improve the perception of customer-centricity among urban customers. Large-scale training in customer relationship management to the marketing, sales and service support staff is the need of the hour.
BSNL has been using various business models to better market its 3G and BWA services. The revenue-sharing franchisee model adopted for its BWA services was the first step by BSNL toward this effort. But BSNL’s offer to share its network for inter-circle roaming arrangements with private telcos received a cold response as it was found to be an expensive revenue-sharing proposition and hence unattractive. If the price is right, BSNL’s similar offers on passive infrastructure and tower sharing, or wired local loop sharing using the ‘collaborate and compete’ philosophy, might yield positive results.
BSNL’s difficulties in reaching 3G to the rural subscribers, despite low price plans, is due to lack of m-awareness of consumers and unavailability of subsidised phones. BSNL should embark on a mission to rapidly increase m-awareness among the rural populace. Bundled handsets with attractive contract terms are one of the ways by which the huge pre-paid segment can potentially be converted into a post-paid segment in rural areas.
Kapil Sibal can also help by freeing up the bureaucratic hurdles and giving appropriate powers to the top management of BSNL to make quick decisions so that the elephant can dance to the tunes of the market. This is imperative, especially when the minister is thinking of making the elephant bigger by merging it with MTNL! It is imperative that the ministry appoints a permanent CMD for BSNL soon so that strategic directives can be implemented.
The authors are telecom professionals based in Bangalore.
Views are personal
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