This year would see the country’s private telecom operators charting a new course. The beginning of 3G services would re-define their entire business strategy. All are looking at 3G services, which should bring high Arpu customers and more data usage, to enhance revenues. But the same can’t be said about state-owned BSNL and MTNL. Both have started off with their 3G services in 2009, but the early start hasn’t helped them much in terms of subscribers, revenues or profitability.
The two together could have built a huge subscriber base. Out of 22 telecom circles, BSNL has 3G spectrum for 20 and MTNL has two most lucrative circles, Delhi and Mumbai, with it. Had they played it right they would have carved a formidable position for themselves ahead of competition. But that never happened.
In a way, the two have acknowledged their inability to tap the 3G potential. MTNL has already invited bids from probable partners to market its 3G services, and BSNL plans to follow suit. The model is simple: Keep the 2G space to yourself because it simply involves voice services which can be marketed in the way it is being done all these years. Their tariffs, lower than the industry average, will anyway keep bringing some subscribers.
The 3G domain, however, could be different. Here no operator has a pan-India spectrum, so everyone is looking at some form of partnership in circles where it does not have the 3G spectrum. In this model, the franchise will market the services and share the revenue with the licensed operator.
Both MTNL and BSNL feel they can better market their 3G services and earn relatively higher revenues through partners. After all, both are in precarious financial positions to be adventurous on marketing. BSNL registered its first ever loss, of Rs 1,822 crore, in 2009-10 while MTNL recorded a net loss of Rs 2,611 crore. Though many models of their revamp have been talked about in the past, nothing has taken off. In this background franchising 3G looks the best option before them for a turnaround.
In fact, MTNL has invited bids for the Delhi and Mumbai circles and Aircel and Tata Teleservices, which do not have 3G spectrum in these two circles, have emerged as frontrunners. The company is expecting to earn upwards of Rs 560 crore per year from this arrangement and industry estimates show BSNL could, similarly, earn close to Rs 5,000 crore in five years.
Won?t such alliances with one?s rivals amount to getting cannibalised. The answer is yes if seen from the context of revenue potential. If MTNL?s last year revenue of Rs 5,578 crore is taken as the base, it would grow 11% annually while BSNL would see a revenue growth of 3% or so, depending on the kind of arrangement it has with the partners.
In fact, according to analysts, ?The only differentiating factor is the kind of 3G services an operator now provides along with the marketing and branding of the product and the strength of the distribution network.? ?Gone are the days where an operator could leverage on an asset such as spectrum. Now one has to think of ways of how to deploy the asset, for instance, through intra-circle roaming and franchising. Telecom is increasingly becoming about partnerships and alliances, and how best you utilise the spectrum?, says Prashant Singhal of E&Y.
?You can?t look at these figures in sheer absolute terms,? says telecom analyst Mahesh Uppal. ?The 3G services market will develop over time; 3G services need to be customised, so it takes time to develop.?
Uppal also plays down the chances of cannibalisation from such alignments. ?To some extent making a rival operator your franchisee could eat into your brand but the underlining point is that there are only three to four 3G spectrum holders in each circle but 9 to 10 operators, so alliances are the only way out. The era of a single operator is over.?