Even as the legal battle over BPL Mobile's ownership continues, the company has set itself the ambitious target of becoming the leading service provider in Mumbai as well as other metro circles.
Amongst the first telecom operators in the country, BPL Mobile currently offers GSM services in Mumbai, where it has a significant presence with over 1.8 million subscribers as of October 2008. The company's road map for the future includes expansion into new circles, which will also help achieve economies of scale in the highly competitive market.
To achieve the next level of growth, BPL Mobile applied for licences in 21 circles through Loop Telecom, its wholly owned subsidiary. It was amongst the series of companies that had submitted applications to the Department of Telecommunications (DoT) for mobile licences in 2007.
In January 2008, Loop Telecom was awarded licences for 21 circles by DoT. It has since received start-up spectrum for 13 circles and is likely to receive spectrum in the Rajasthan circle soon. It is in the process of establishing networks to roll out services at an investment of $2-2.5 billion.
For funds, BPL Mobile is considering various options including debt and equity. It recently raised about $80 million when it issued 17.6 per cent equity stake in Loop Telecom to a Mauritius-based company owned by an international institutional fund. The funds will be used for the expansion of BPL Mobile and Loop Telecom. To reduce costs in rolling out new networks, BPL Mobile intends to partner with Essar Telecom Infrastructure.
Following the sale of stake to the Mauritius-based company, BPL Mobile's share in Loop Telecom has gone down from 74 per cent to 61 per cent. Essar Teleholdings' stake in the firm now stands at 8.2 per cent, while Mauritius-based investment company CapitalGlobal owns 13 per cent, down from 16 per cent.
Performance
In 2003, BPL Mobile was a leading operator in the Mumbai circle with close to 40 per cent market share. It has since lost considerable ground to rivals like Vodafone Essar, Bharti Airtel and even Mahanagar Telephone Nigam Limited. It accounted for only 9 per cent of the market in March 2008. Between March 2006 and March 2007, its subscriber base declined from 1.34 million to 1.07 million. One reason for the huge decline was the cancellation of subscriptions under the Telecom Regulatory Authority of India's (TRAI) verification guidelines. This resulted in a substantial loss in its market share (till March 2006 the company's market share stood at over 18 per cent).
To arrest the fall and increase its subscriber base, BPL Mobile has taken several measures over the past year and a half. It has increased the focus on the youth segment and launched occasionspecific products. This has enabled it to gain a large share of the gross and net additions in the market.
The operator regularly invests in network upgradation. In 2007, it expanded its network capacity by approximately 75 per cent at a substantial investment of Rs 2 billion. It recently awarded a Rs 1 billion endto-end telecom equipment supply contract to Huawei for an all-IP next-generation network infrastructure. The company already has 1,300 towers and plans to install 500 new towers by the end of 2008.
As a result of the consistent improvements in its network, BPL Mobile has emerged as one of the very few operators in the country to have met all the benchmarks set by TRAI in terms of quality of service (QoS), unlike operators like Bharat Sanchar Nigam Limited, which have given more connections than their infrastructure permits and therefore have had to contend with complaints regarding QoS.
BPL Mobile has several firsts to its credit in the value-added services space. It was the first operator in the country to offer GPRS/MMS, caller ring tunes, mobile tracker services, voice SMS and mcommerce. This can be attributed to the technology upgradations undertaken by the company, which have enabled it to provide new services.
For example, in mid-2007, the company rolled out its mobile TV service in partnership with ZTE Corporation. The latter provided the technology to make mobile TV possible on the GSM platform. To make the service a success, BPL Mobile focused on providing customised content to its customers. For instance, it reduced the duration of movies from three hours to 25-30 minutes.
BPL Mobile recently also launched a local search service in Mumbai. Bharti Airtel is the other operator that has launched this service, under a tie-up with a company called AskLaila.
BPL Mobile's initiatives seem to be paying off. Its market share has increased, albeit marginally, to about 11 per cent as of September 2008, from 9 per cent less than a year ago.
Helped by world-class technology upgradations and innovation, the company's monthly subscriber additions nearly doubled from 77,000 in August 2008 to 147,000 in September and 144,000 in October. This was higher than the figures posted by its competitors. Going forward, BPL Mobile intends to build on its strengths and expand its network across the country.
Issues and concerns
Since August 2006, BPL Mobile has been caught in the crossfire of a shareholder dispute. The matter has now been taken up by an arbitration panel; shares in BPL Mobile or its subsidiary Loop Telecom cannot be sold, transferred or mortgaged without the approval of this panel.
As a result, BPL Mobile, which had earlier been in talks with almost all key global players including Zain Telecom and Telenor to sell stake in Loop Telecom, may not now be in a position to scout for an equity partner.
Swan Telecom and Unitech, two of the other new telecom operators, have recently clinched equity sale deals with Etisalat and Telenor respectively, and have witnessed an exponential increase in their valuations. The Essar Group's inability to do so may impact its ability to raise funds for network expansion.
"The dispute over the Mumbai circle needs to be resolved before the company can look around for a foreign partner, as the regulatory uncertainty surrounding the company will not make it an attractive investment proposition for foreign players," says Harit Shah, analyst, Angel Broking.
Gaining market share in the new circles will clearly be a Herculean task for BPL Mobile as it battles its way past ownership issues and faces stiff competition from established players as well as new entrants. "Gaining market share will be a tough battle for all new entrants, and Loop Telecom is no exception. While its Mumbai circle is relatively well established, I don't think the company will be profitable in the other circles for a while at least, given the low tariffs in the country and the fact that most of its subscribers will be from the low-income rural segment," says Shah.
Nevertheless, given that the company has successfully combated competition in India's most lucrative circle for over a decade, it is expected that it will be able to hold its own when it launches countrywide services. As a result of the consistent improvements in its network, BPL Mobile has emerged as one of the very few operators in the country to have met all the benchmarks set by TRAI in terms of quality of service.
