Going Global

Why not BSNL?
It remains a mystery why BSNL, with a net worth of $14 bn, has not been

allowed to go global. BSNL is totally absent from the whole picture unlike the

other incumbents like ATT and BT who made their presence felt across the

globe by offering wholesale voice services. 
There have been talks off and on about BSNL planning to go global but

nothing concrete has emerged. While other government PSUs, MTNL and TCIL, were

allowed to form subsidiaries outside India, little is known of the reason behind

BSNL not been given the opportunity despite being cash rich. 
On top of that, it is yet to even get an ILD license, which, however, can

be attributed to historical reasons.

AK Sinha, CMD, BSNL, offers an explanation for this slow progress on global

ambition: “We will go for something big.” He, however, mentioned that long

back there was a proposal from Nigeria but it was not thought to be attractive

for BSNL. Giving another reason, he said, “I think we have a big Indian market

ahead of us which is still under-serviced. Our main focus will remain India for

the coming few years.”

Wholesale Gamble: the USPs
VSNL, Reliance, and Bharti primarily want to play in the business of the

wholesale voice and bandwidth space and compete with the likes of Global

Crossing, 360networks, Cable Wireless, Colt, and Level 3 Communications.

VSNL: Its

international operations’ background begins with: “This isn’t the old VSNL.”

Probably trying to break free from the government-run PSU image to a company

which has become truly international with two big acquisitions-Teleglobe and

TGN.  In terms of bandwidth,

VSNL’s pairing of Teleglobe with TGN will create a massive network considering

Teleglobe alone accounts for 90 submarine and terrestrial network systems apart

from satellite connectivity across the globe. The key to TGN is the

trans-Pacific submarine cable, which currently accounts for 40% of the

trans-Pacific capacity. According to TeleGeography, the Tyco cable has the

ability to upgrade its capacity to potentially account for 85% of that.

According to TeleGeography, VSNL, through Teleglobe’s acquisition, got

access to about 30 bn minutes international VoIP market largely due to ITXC

(acquired by Teleglobe in 2004).  According to its estimate, VoIP, which formed under 15% of

the global call market in 2004, is growing at double to triple the rate of the

traditional public switched voice market. TeleGeography further estimates that

this, combined with Teleglobe’s wholesale voice operations around the world,

will make VSNL the fifth largest carrier of voice minutes in the world. This is

where VSNL will have an edge over global competitors as well as Reliance and

Bharti. This network will also add Internet connectivity to 14 countries, not

earlier accessible to VSNL, besides providing bandwidth support to its Indian

operation.

The challenge before VSNL is managing the cost of operation and maintenance

of the network, which would not be an easy task. According to TeleGeography,

there is little profit to be made in the hyper-competitive subsea capacity

market but it adds that the average Internet traffic across the Atlantic and the

Pacific is showing strong demand.

Reliance

Communication: Through Flag Telecom’s acquisition (for $207

mn), Reliance gained access to network assets worth over $3 bn spanning across

Asia, Europe, the Middle East and the US. This also means that the Reliance

customers would pay low global access rates. Reliance has a customer base of

more than 180 leading operators which includes most international carriers. Flag

is also in the process of rolling out its Falcon cable system landing in 11

countries.

“To be

competitive in India, we have to be present in the International

market”

-Srinivasa Addepalli, head of Corporate Strategy at VSNL

“International

roaming is a key component of our revenue in Seychelles”

-Vinod Sud, CEO, Telecom (Seychelles)

Bharti: Bharti

and SingTel entered into a JV in 2000 to self-healing submarine cable network at

the cost of $650 mn with a bandwidth capacity of 8.4 Terabits per second. It

will carry more than 100 mn conversations simultaneously. In Singapore, it will

link SingTel’s extensive cable network to the rest of the world. The undersea

cable venture will also sublet bandwidth to other Indian operators, with the

opening up of the DLD and ILD telecom sectors in India.

Outlook
It would be a tall order to even think of Indian telcos going the ATT,

BT, or Vodafone, Hutchison Telecom way. The only good news is that in the

wholesale bandwidth and wholesale voice marketplace, the Indian companies can

become a force to reckon with and provide some competition, thanks to the

acquisitions of Tyco, Teleglobe, and Flag. The situation in the retail forays

(fixed and wireless services) of Indian companies remains grim with a handful of

licenses and few subscribers that have been acquired by Indian companies to

operate globally.  BSNL’s entry

into the global business would be an interesting development, if it happens in

the near future. 

The one thing which all Indian companies lack is brand. There is need for lot

of hardselling that has to be done. But with the Indian outsourcing industry’s

success story being talked about globally, this may also become an easier task.

Adepalli accepts this is as a challenge when he says, “VSNL is a well known

brand in India. Creating that kind of an image for our company globally is a big

challenge for us.”

There are lessons to be learnt from the success of the likes of Hutchison

Telecom, Vodafone, and Orascom. In the near term, the opportunities that

Reliance, VSNL, and Bharti can exploit is the 10 mn plus members of Indian

diaspora in countries in North America, Gulf, and Africa.

Sudesh Prasad
sudeshp@cybermedia.co.in

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Going Global