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Tele Data

Mobile Subscribers Yearwise comparision

Strong Headwinds: A challenging year for key telecom operators

January 31, 2012

As the year 2011 drew to a close, the country’s teledensity crossed 75 per cent, as compared to below 5 per cent a decade ago. With 889.41 million wireless subscribers as of December 2011, the mobile growth story continued even as the telecom industry grappled with the 2G spectrum issue.

Though the sector witnessed growth during 2011, the going got tough for telecom operators. Already battling issues such as cut-throat competition, dwindling margins, high rollout costs, unclear policy decisions and spectrum scarcity, they also had to steer clear of the 2G issue.

There were minor changes in the pecking order of service providers in 2011. Bharti Airtel retained the top spot, followed by Reliance Communications (RCOM), Vodafone, Idea Cellular, Bharat Sanchar Nigam Limited (BSNL), Tata Teleservices Limited (TTSL), Aircel and Mahanagar Telephone Nigam Limited (MTNL).

Early 2011 saw the rapid rollout of 3G services at competitive prices. However, the uptake was slow and the 3G user base currently stands at about 17 million.

Meanwhile, since no operator had a pan-Indian 3G licence, telecom companies signed roaming agreements to offer these services across the country. Bharti Airtel, Vodafone and Idea Cellular formed a partnership, while TTSL and Aircel combined to offer pan-Indian 3G services. These agreements were based on the understanding that using each other’s airwaves was legal and permissible. However, the Department of Telecommunications (DoT) did not agree to this and termed the pacts a violation of licence conditions. DoT has been examining the financial implication of these arrangements, which are equivalent to spectrum sharing, a practice not allowed under the current guidelines. The issue is currently pending with the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).

Moreover, given the overall policy and regulatory ambiguity, the industry’s morale is low. Therefore, 3G services, which the telecom operators were banking on to increase revenues, did not take off. Besides, broadband wireless access (BWA) and long term evolution (LTE) service launch has been delayed as well.

Concerned by these developments, the government is trying to settle the dust clouding the telecom industry.  The draft National Telecom Policy (NTP) was released in October 2011 and sought a review of several policies and regulations. The sector is  expected to benefit from these changes in 2012.

Going forward, the wireless segment would continue to be the driving force for the telecom industry. This will intensify competition, which would see operators launch new and innovative services. presents the business profiles of key service providers and take stock of their recent initiatives…

Bharti Airtel

Bharti Airtel, like its peers, struggled with declining profits and increasing interest costs during 2011, besides defending its leadership position in the telecom industry. The operator continued to hold the largest wireless market share, but it lost some ground as compared to 2010. Between December 2010 and December 2011, its wireless market share dropped from 20.27 per cent to 19.75 per cent.

The company’s financial performance was not very impressive over the past several quarters. It reported a 38.17 per cent year-on-year drop in net profits from Rs 16.61 billion for the quarter ended September 2010 to Rs 10.27 billion during the same period in 2011. This was the seventh consecutive quarter in which the company reported a decline in profits. However, Airtel’s African business reported a revenue growth of 23 per cent from $838 million to $1,030 million during the same period. The operator though is yet to achieve break-even in its African operations.

To improve its financial condition, the operator, after nearly two years of sharp tariff cuts, recently increased call rates by 20 per cent in a few circles. This was a significant move for the industry. However, the operator, along with Vodafone Essar, RCOM and Idea Cellular, has come under the Telecom Regulatory Authority of India’s (TRAI) scrutiny for the tariff hike. The regulator has directed these companies to justify the tariff increase.

In August 2011, Airtel undertook an operational restructuring exercise to improve its efficiency. The company now operates under two customer business units, one serving corporate clients (business-to-business [B2B]) and the other handling its retail offerings (business-to-consumer [B2C]). The B2C segment, which includes mobile, telemedia, digital television, mobile commerce and mobile advertising, is divided into consumer business and market operations. The B2B unit focuses on corporates, and small and medium businesses, besides the company’s undersea cable offerings.

3G has been a key focus area for Airtel. The company started 3G service rollouts in early 2011 and  subsequently covered all its licensed circles. In circles where it did not have a licence, Airtel entered into partnerships with Vodafone and Idea Cellular in order to provide pan-Indian 3G services. However, DoT recently directed operators to terminate these agreements, following which the service providers have approached TDSAT.

Airtel’s current 3G user base stands at over 7 million. So far, the company has invested about Rs 130 billion in 3G rollouts, excluding the licence fee and infrastructure spends.

On the broadband front, the operator held 6.73 per cent market share with 1.41 million subscribers as of September 2011. The company also has major plans for  BWA services, for which it has spectrum in four circles. It aims to launch BWA services ahead of its rivals by February 2012. To achieve this target, the operator is likely to consider allocating network rollout contracts to multiple vendors, instead of a single equipment supplier. This will help in optimising costs and leveraging relationships with vendors. ZTE will roll out Airtel’s LTE network in the Kolkata circle.

Meanwhile, the operator is planning to become one of the leading 3G players in the African market. In September 2011, it tied up with the Rwanda Utilities Regulatory Agency to provide 2G and 3G GSM mobile services in the country. With this licence, the company’s footprint in the continent has increased to 17 countries. Airtel plans to invest over $100 million in its Rwanda operations over the next three years. It is aiming at revenues of $5 billion and an earnings before interest, taxes, depreciation and amortisation (EBITDA) of $2 billion from these operations, as well as a subscriber base of 100 million by end-March 2013.

In 2011, the company also entered the tablet market. Bharti Teletech, the operator’s handset manufacturing arm, launched the Magiq tablet at a competitive price of Rs 9,999.

Going forward, 3G will continue to be a key business area for Airtel, with plans to cover over 1,500 cities through these services by March 2012. Also, it is likely to be one of the first providers of BWA services in India.

Reliance Communications

RCOM had, till recently, managed to stay ahead in the telecom race by innovating constantly and keeping the buzz about itself alive. That, however, changed in 2011. The company’s alleged involvement in the 2G spectrum scam significantly impacted its growth plans.

The report by the Comptroller and Auditor General (CAG) on the allocation of 2G spectrum stated that RCOM  held 9.81 per cent equity (10.79 million shares) in Swan Telecom, which made Swan ineligible for a 2G licence; however, its application was not disqualified. The controversy gathered steam when the Supreme Court directed the Central Bureau of Investigation (CBI) to probe  RCOM’s operations from 2001 to 2007 and interrogate company officials. While the court, in 2011, declared that the officials may not have a direct involvement, it did not give the company a clean chit.

Controversies notwithstanding, the company was able to maintain its position as the second largest telecom operator in the country. As of December 2011, its wireless subscriber base stood at 150.08 million, accounting for a market share of 16.87 per cent. Mobile number portability (MNP) certainly did not work in the company’s favour as it lost 1.34 million users as of November 2011.

Having launched 3G services in 2010, ahead of its rivals, RCOM spent a major part of 2011 in increasing its service coverage in all its licensed areas. In April 2011, it became the first operator to launch 3G services in 24 locations in the Northeast. According to company officials, nearly Rs 5 billion has been invested in improving the network quality in this region.

RCOM, which has a presence in both the GSM and CDMA segments, has an edge on the 3G front since it can offer both data cards and dongles. However, the operator does not have a significant proportion of high-end customers, which has affected the uptake of these services. Its initial positioning as a mass-market brand is now impacting it adversely.

To increase its 3G subscriber base, the operator focused on improving the user experience. It launched a new mobile data portal, R World, which offers features like content aggregation, single sign-on, news feeds and social networking capabilities. In August 2011, RCOM entered the Android tablet market with the launch of the Reliance 3G Tab. Available for Rs 13,000, it became the first 3G+Wi-Fi Android tablet to be released by a service provider in India.

The company took several initiatives on the rural telephony front as well. In January 2011, it launched a joint venture (JV) company, Kribhco Reliance Kisan Limited, in partnership with Kribhco, a cooperative society. The JV’s main focus was to catalyse teledensity growth and offer state-of-the-art telecom products and services to rural subscribers. Further, in March 2011, it launched a rural value-added services (VAS) initiative called Behtar Zindagi, which provides day-to-day information on health, education, finance, weather, mandi rates, etc.

Impacted by declining margins, RCOM reported a 43.5 per cent drop in net profits from Rs 4.46 billion for the quarter ended September 2010 to Rs 2.52 billion for the corresponding quarter in 2011. Its net debt stood at Rs 320 billion. The company entered into various deals to take care of its increasing liabilities. In March 2011, it signed a $1.93 billion 10-year syndicated loan agreement with the China Development Bank (CDB) to refinance debt raised to pay for spectrum fees and telecom equipment purchases. This will translate into an annual interest cost saving of over Rs 5 billion. Further, RCOM has largely been unaffected by the recent rupee depreciation that made foreign currency-denominated debt very expensive. This is due to its agreement sanctioned by the Bombay High Court, which allows it to offset any mark-to-mark loss on loans (or derivatives) arising out of foreign exchange fluctuations against its general reserves.  Besides, the company is in exclusive talks with a consortium of private equity firms Blackstone and Carlyle to sell off a majority stake in Reliance Infratel and is likely to finalise the deal soon.

In February 2011, RCOM exited its PCO and fixed wireless phone business with a view to improve margins and efficiently utilise spectrum. The resources, thus freed, have been diverted into more profitable areas such as data and VAS enhancement. As a part of its VAS initiative, the operator has launched mobile banking services in association with the State Bank of India (SBI). It also undertook business restructuring in September 2011 to transform itself into a leaner, flatter organisation.

Going forward, the operator’s focus area will be data services and it is soon expected to launch data cards that can work on both the GSM and CDMA platforms. RCOM has also set a target to reduce its debt by 50 per cent before March 2013.

Vodafone India

The past year proved to be a significant one for Vodafone Essar with it becoming Vodafone India after completing the acquisition of its Indian partner. In April 2011, the Essar Group exercised its underwritten put option to sell 22 per cent of its 33 per cent stake to Vodafone. The stake sale marked the end of a four-year partnership between Vodafone and the Essar Group in the country. Under the terms of the agreement, the remaining 11 per cent (held by Essar Communications Holdings in Vodafone Essar) will be transferred to Vodafone by February 2012. The deal, however, resulted in the operator paying Rs 39 billion as tax on the transaction in September 2011.

On the operational front, Vodafone performed fairly well. It was able to maintain its share as well as its position in the wireless market. Vodafone retained its third position in the industry, with a market share of 16.6 per cent as of November 2011. The company’s subscriber base stood at 147.74 million as of December 2011. Vodafone Group Plc announced that the service revenue from its Indian operations had grown annually by 16.2 per cent for the year ended March 2011.

Over the years, as competition has become cut-throat and rivals have aggressively expanded their operations in the wireless space, Vodafone continues to be a pure-play GSM operator. Customer acquisition and retention remain a top priority for the operator. The past year saw it launch several innovative products and services. As a result, nearly a month after the nationwide rollout of MNP services in January 2011, Vodafone emerged as the biggest gainer. As of November 2011, it received around 1.21 million MNP requests, the second highest in the country.

After attracting considerable public interest through a series of advertisements featuring the ZooZoos (its popular ad creation) during the ICC Cricket World Cup, Vodafone finally launched its 3G services in March 2011. Vodafone is relying heavily on its 3G services, given the group’s vast global experience in this space. Further, it has a larger proportion of high-ARPU users than its rivals. This means that the operator can expect strong 3G uptake.

However, so far, its 3G services in India have not shown satisfactory growth. To change this, it has adopted various strategies. For instance, it has extended its strategy of selling self-branded handsets at affordable prices in the 3G space. The strategy, which helped the operator secure a foothold in the rural markets, is now being implemented in the urban areas to drive 3G growth. Vodafone recently launched an Android-based 3G handset, Vodafone Smart, priced at Rs 4,995. At present, the company’s 3G coverage spans all the 10 circles where it won spectrum. For circles in which it did not acquire spectrum, it has entered into 3G roaming alliances with other operators. Although DoT recently ordered the termination of these arrangements, TDSAT stayed the order following an appeal from the operators. A decision on whether the 3G roaming agreements will be allowed is awaited.

Vodafone has been fairly vocal in its protest against DoT’s stand on ICR agreements, and on 2G spectrum pricing and allocation. On several occasions, the operator has pointed out anomalies in the spectrum allocation policy. The key concern, in addition to the shortage of spectrum, is that the operator will be required to pay heavily for spectrum beyond the contracted 6.2 MHz if the TRAI recommendations go through.

Another hurdle for the operator is the declining revenue trend in the industry. While revenue growth remains flat, the user base has increased, forcing the operator to survive on wafer-thin margins. As a result, Vodafone, following in Airtel’s footsteps, increased its tariff by 20 per cent in most of the circles in mid-2011.

Going forward, 3G will be the most significant area that Vodafone, with its global expertise, will focus on. Further, it is not averse to exploring different revenue streams and is looking to foray into the leased landline and business solutions space. The operator also plans to unlock value by demerging its tower business and selling it off to an independent tower company in the near future.

Bharat Sanchar Nigam Limited

Once a coveted player, BSNL today faces several challenges in the form of capacity constraints, bureaucratic delays, excessive manpower, poor financial health and stiff competition from private players. The operator’s struggle to revive its deteriorating operational and financial condition continued through 2011 as well.

BSNL’s losses increased from Rs 18.22 billion in 2009-10 to Rs 60 billion during 2010-11. This is attributed to the huge outgo on employee salaries and expenses for procuring 3G and BWA spectrum. Further, its position in the wireline as well as wireless markets has continued to suffer. Between November 2010 and November 2011, BSNL lost around 2.5 million wireline subscribers. Its wireless market share also declined from 11.48 per cent to 10.86 per cent during the same period. Moreover, the introduction of MNP has done little for the company. As of November 30, 2011, the operator recorded a net loss of around 500,000 users.

The incumbent has fared poorly on the 3G and BWA fronts as well. While BSNL was given 3G and BWA spectrum much ahead of its private counterparts, the company failed to capitalise on this opportunity. To recover its investment of Rs 83.13 billion for securing the pan-Indian BWA licence, BSNL surrendered its BWA airwaves to the government. With DoT’s recent approval to this proposal, this reimbursement could strengthen BSNL’s financial position.

Also, this step is unlikely to hinder BSNL’s plans for broadband-driven growth. With around 614,755 route km of optic fibre cable (OFC), the operator has the largest network in the country, with widespread rural coverage and last mile connectivity. Since 90 per cent of its existing broadband users are on DSL networks, the operator plans to leverage this reach to improve its broadband services over the fixed line platform.

It has already launched fibre-to-the-home services through which users can access the internet at a speed of 100 Mbps. It recently rolled out services in Pune and will soon be extending these to other circles as well.

In April 2011, Rakesh Kumar Upadhyay took charge as chairman and managing director of BSNL. Since then, the PSU has chalked out various strategies to put its house in order. It has planned investments of up to Rs 10 billion to revive its landline business. This includes the implementation of a call data record system that would enable automated billing, identification of faults and monitoring of its entire wireline business. The operator is also planning to outsource several activities, including operations and maintenance of these landlines. Further, to strengthen its OFC network, BSNL has awarded a Rs 1.14 billion contract to Sterlite Technologies for putting together a central office broadband system in 20 telecom circles. Expected to be commissioned by March 2013, the project will have the capacity to handle about 1.6 million broadband connections. The company, which is facing a severe capacity crunch, plans to order equipment for adding 14.37 million mobile telephone connections by March 2012. It has opened the bids for the equipment supply contract and, reportedly, all major vendors have participated in the bidding process.

On the financial front, BSNL has been taking significant strides to wipe out its losses in the next two-three years. Apart from accomplishing circle-wise revenue targets, the operator is at the last stages of devising a voluntary retirement scheme for its employees. To this end, it has requested for a government assistance of Rs 120 billion. Having worked out a total cost of Rs 160 billion for providing a one-time compensation to about 100,000 employees, BSNL will meet Rs 40 billion of this requirement on its own.

Further, it has requested the government to continue the annual subsidy of Rs 20 billion received under the Universal Service Obligation (USO) Fund towards its commercially non-viable operations.

The PSU is also looking at new revenue streams, which include leasing the spare capacity of its 60,000 towers to private players and commercialising its idle land across the country through public-private partnerships. The operator is betting big on its enterprise business and expects to generate around Rs 30 billion from this segment by March 2012.

Idea Cellular

With declining profits, stiff competition from incumbents and a sector engulfed in controversy, Idea Cellular faced many challenges in 2011. The year began with the operator facing hefty liquidated charges for missing out its rollout obligations. After the operator submitted several petitions challenging the order, TDSAT in September 2011 directed DoT to start the process afresh. The decision came after TDSAT observed that the private company was denied an opportunity to present its case, which led to ignorance of certain established procedures.

In March 2011, the CBI initiated a probe into the validity of Idea’s licence application, filed in August 2005, for the Mumbai circle. After rounds of questioning, the agency found no evidence of wrongdoing against the operator.

Further, Idea’s overlapping mobile permits with Spice Communications (which it bought in 2008) in six circles has for long been a contentious issue between DoT and the operator. According to DoT, the acquisition violates M&A guidelines and, thus, the permits should not be transferred to Idea. Recently, DoT decided to cancel one of the two mobile permits held by the operator in the Punjab circle. It also decided to seek legal opinion on Idea’s move to merge the national and international permits held by Spice with itself.

However, notwithstanding the regulatory challenges, in 2011, Idea successfully launched 3G services in all the circles where it has licences. Unlike its competitors, Idea’s 3G strategy focused on rural areas. While the majority of operators launched their services in the metros before going to smaller towns and villages, Idea initiated its 3G rollout in semi-urban areas and then moved to Tier 1 cities.

In order to acquaint its users with the 3G experience, Idea set up “experience kiosks” across the country. It also introduced a promotional time-based billing plan for 3G customers. At present, its 3G coverage spans over 1,600 towns across 20 circles (excluding Orissa and Punjab) through a combination of home-grown network and roaming arrangements with other operators. However, the fate of the roaming pacts is uncertain.

In keeping with its overall strategy, the operator maintained its focus on rural subscribers during 2011. As a result, it recorded the highest proportion of rural subscribers in the total subscriber base. As of June 2011, rural subscribers comprised almost 53 per cent of its total user base. In order to customise services for these users, Idea has taken initiatives such as a tie-up with VAS provider handygo to launch an information service. The operator is also promoting m-banking with the launch of the Idea MyCash facility in collaboration with Axis Bank.

Idea was amongst the top gainers from MNP. From January to December 2011, it reported a net gain of 220.9 million users. According to analysts, the aggressive initial marketing and advertising strategy around MNP seems to have worked for the operator.

In September 2011, Idea crossed the 100 million subscriber mark and in the last five months of 2011, it was the largest gainer in terms of monthly subscriber additions. As of December 2011, it was the fourth largest player in the market with a subscriber base of 106.38 million users.

However, operating in an industry faced with continuously falling profits, the operator too has taken a beating on the financial front. It recorded declining profits during the quarters ended June and September 2011. With high interest costs and foreign exchange losses, the company reported a 41 per cent drop in net profits during the quarter ended September 2011. Also, in the quarter ended December 2011, Idea reported a 17 per cent fall in consolidated net profit to Rs 2.01 billion as compared to Rs 2.43 billion in the corresponding quarter of 2010. In an attempt to  improve its position, Idea increased its prepaid tariffs by up to 20 per cent in mid-2011.

Going forward, 3G, voice-based services and the rural market will continue to be the key focus areas for the operator. It has already invested Rs 100 billion (including Rs 5.8 billion as auction fees) in rolling out 3G services and plans to invest another Rs 40 billion in 3G network infrastructure, including erecting around 16,000 towers by March 2012.


A low-risk player for long, TTSL turned the tide in 2009 and charged ahead of its rivals with several innovative offerings, VAS and tariff packages. The aggression continued in the following year when it became the first operator to launch 3G services in the country.

However, much of the energy of the previous two years seemed to have dissipated in 2011. TTSL’s net wireless subscriber additions have been fluctuating since March 2011 and the operator recorded a subscriber loss of about 4.45 million  in November 2011. Moreover, its monthly subscriber additions dropped by an unprecedented 40.13 per cent in July 2011. The player had the sixth largest mobile market share as of December 2011 with a user base of 83.49 million.

Also, as per TRAI reports, TTSL is the only Tier 1 operator to have reported more than half of its subscribers as inactive. As of November 2011, TTSL’s visitor location register numbers at 54.01 per cent were even lower than a new operator like Uninor (59.55 per cent).

TTSL spent most of 2011 in consolidating its operations to derive internal efficiencies and reduce costs. It combined its business assets such as spectrum, retail touchpoints, digital footprint and consumer franchises. It also integrated its service offerings (including CDMA, GSM, fixed line, 3G and Photon) under a single brand, TATA DOCOMO. Post integration, the operator’s large CDMA retail footprint has become accessible to GSM services as well. This may help TTSL in expanding its subscriber base, which has been decreasing since the introduction of MNP in January 2011.

The operator, like others, focused on offering 3G services in 2011. Having launched these services before its rivals, TTSL’s strategy was to first provide users a flavour of the 3G experience. Towards this end, it offered promotional services free of cost and converted its retail stores into experience centres. Its partnership with NTT DOCOMO provided an advantage as the Japanese operator is a technology leader in the global 3G space.

In March 2011, NTT DOCOMO announced an investment of Rs 8 billion in TTSL as part of a rights issue by the Indian partner. The majority of this amount was spent on upgrading the operator’s 3G network in India. In addition, TTSL borrowed Rs 5 billion from IDFC as a long-term debt to fund the heavy capex for 3G and network expansion.

Currently, the operator offers 3G services across all nine licensed circles. To provide pan-Indian 3G coverage, it had entered into a roaming alliance with Aircel, which was recently terminated after DoT termed such agreements illegal.

On the device front, TTSL launched six CDMA handsets in 2011. It also introduced the 3G Wi-Fi Hub, an internet access device, which offers connectivity for specific Wi-Fi devices, apart from the Photon Max internet service on its Rev. B platform. Moreover, the operator diversified its service offerings by entering the location-based services market.

In end-2011, TTSL had expressed concerns regarding the management of Viom Networks, its JV with the SREI Group.  After a KPMG audit reported cash pilferage, TTSL is now planning to reduce its stake in the tower company from the current 54 per cent.

As an initial CDMA operator, TTSL is perceived as a mass-market brand. It is, therefore, a challenge for the company to attract high-end users, which puts pressure on its margins. Going forward, retail, VAS and 3G will continue to be the company’s key focus areas.


From a regional player to the telecom centre stage, Aircel had shot to prominence in 2010 riding on an aggressive branding exercise. But last year, the hype disappeared. The operator, like many of its peers, maintained a deliberately low profile, trying to cope with the controversies that raged around it.

The year began with Aircel coming under the CBI scanner for alleged involvement in the 2G spectrum scam – a fallout  of the probe into former telecom minister Dayanidhi Maran’s role in “forcing” Aircel promoter C. Sivasankaran to sell his stake in the company to the Malaysia-based Maxis Group in 2005. The matter is still under investigation.

In the latter half of the year, the company ran into regulatory trouble for delayed rollout of services in rural India under the shared mobile infrastructure scheme, subsidised by the USO Fund. So far, Aircel has only 914 sites operational of the targeted 1,267, a shortfall of around 27 per cent. As such, the company may have to forfeit its liquidated damage charges and bank guarantees. It has taken the matter to TDSAT.

On the positive side, it was an operationally satisfactory year for Aircel, starting with 3G rollouts in all the 13 circles where it won licences. It also worked out a roaming partnership with TTSL to offer pan-Indian 3G services.

Aircel, which has BWA spectrum in eight circles, has selected the LTE technology to offer these services. In August 2011, it conducted LTE TDD trials with vendors and plans to launch services in 2012.

The company maintained its focus on data services during 2011. It rolled out 50,000 Wi-Fi hotspots across the country, which it intends to leverage once 3G service uptake picks up and BWA services are rolled out. As more subscribers opt for these services and networks get congested, data traffic can be offloaded to Wi-Fi networks. In November 2011, Aircel entered into a data centre partnership with Tulip Telecom to build a portfolio of services for corporate customers.

In the devices space, the company entered into exclusive arrangements with vendors such as Research In Motion and Huawei to promote VAS.

The company also continued its effort to gain market share. As of November 2011, its subscriber base stood at 61.64 million, accounting for 9.64 per cent of the GSM market.

To improve its efficiency and consolidate its operations, Aircel undertook business restructuring in September 2011. It aligned all its major business functions into two divisions – operations and network. While the former includes the operator’s go-to-market strategy, branding exercise and subscriber additions, the latter comprises its active infrastructure business.

Going forward, 3G, BWA and VAS will be the key focus areas for Aircel. Further, it plans to increase its market share to 11 per cent in the next three years and take its subscriber base to 100 million. Also, the operator is very positive about the uptake of 3G services. Over the next three years, it intends to invest $3 billion in deploying infrastructure across the 13 circles.

Mahanagar Telephone Nigam Limited

For Mahanagar Telephone Nigam Limited (MTNL), 2011 proved to be yet another difficult year. The state-run operator, which was a profitable venture till December 2008, has been reporting losses for the past several quarters. Its market share has also declined significantly due to stiff competition from private operators.

As of November 2011, MTNL, which operates in the Mumbai and Delhi circles, registered 5.64 million users and a market share of 0.64 per cent. It reported a decline in subscriber numbers in the wireline segment, in which it once enjoyed a monopoly, with its user base falling to 3.45 million as of October 2011.

In terms of revenue, MTNL reported a loss of Rs 8.63 billion for the quarter ended September 2011, about 43 per cent higher than the loss incurred during the corresponding quarter of 2010. A key reason for this could be the operator’s inability to attract high-end users. Moreover, with about 45,000 employees, the company is clearly overstaffed. It is considering the introduction of a voluntary retirement scheme in order to reduce its workforce. However, the move has met with strong opposition from the PSU’s employee union. Besides, the company will also require high payouts for pension and other retirement benefits.

To salvage its position, MTNL undertook several initiatives like a brand revamp, organisational restructuring, improvement in customer care services and expansion of its service portfolio, during 2011. For instance, the company increased its focus on the enterprise segment and expects to earn revenues worth Rs 5 billion in the current financial year.

Also on the cards is the commencement of wholesale business operations wherein it will share a part of its network with private companies. As part of its wholesale business, it had in 2011 invited expressions of interest from operators for 3G roaming agreements. However, with the validity of agreements still unclear, no development has taken place on this front.

As for the broadband wireless access (BWA) services, MTNL has decided to deploy LTE technology and expects to launch these services in the second half of 2012. It has floated expression of interest for outsourcing this business. The deal would be based on a revenue sharing arrangement and the winner would manage the services and network.

The year 2011 closed with appointment of A K Garg as MTNL’s new chairman and managing director, who considers bailing out the company from losses as his top most priority. He is looking at monetising operator’s huge land bank and expects revenues of around Rs 500 million in 2011-12 from its leasing services. Going forward, the company plans to launch new services like IP-based multimedia acoustic services on its network.


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