Prakash Chaukar says that BSES Telecom is looking at every possible revenue stream to break even

BSES Telecom has seen some tough times with big plans of signing up a huge number of subscribers and setting up a chain of cybercafes going awry, frequent management changes, and even subscriber anger over supposedly poor services. But rather than sink under the weight of these problems, the company has decided to fight back and has drawn up a new realistic plan, which may help ring in better times. Srikanth R P has the details

Just as competitors were sharpening their claws to tear into BSES Telecom, and analysts and the media were readying to write its epitaph, the ISP and broadband player may actually surprise everyone with its results for 2001-02, which may be announced any day now.

In recent years BSES Telecom has witnessed a game of musical chairs being played, with frequent changes in leadership and redrawing of plans almost wrecking the company’s image. The company had everything going against it lack of a clear strategy and over-ambitious plans of roping in 80,000 subscribers on its broadband OFC network, and setting up its own branded cybercafes called ‘e-marts’. While the cybercafe plan died an ignominious death after a few centres were launched, the broadband spiel hasn’t roped in the expected number of subscribers either with just 3,500 subscribers in Mumbai’s suburbs. Worse, BSES is facing subscriber ire over low speed connectivity. A case in point is Jal Vayu Vihar, at Powai in Mumbai where users have formed a forum to address the problems faced by broadband users of BSES Telecom. Further, analysts say there was no clear strategy for the company’s foray into territories where business viability simply didn’t exist.

But things are slowly changing and BSES Telecom may finally see the light at the end of a long, dark tunnel soon. Company sources attribute this to the most recent change in leadership and fine-tuning of the company’s strategy. Says Prakash Chaukar, GM, BSES Telecom (one of the key men in a committee of three that reports directly to the director), “Our strategy today is clearly to take every single connection as a project. We evaluate every project for its business viability and see how it fits into our future growth path. For example, if a customer wants a broadband connection in a particular area, we will evaluate the area to see if we can get critical mass. We have also taken the help of franchisees to aggressively sell our services. This has resulted in the fact that we have achieved the same sales figures in the three months between January to March, 2002 as we had achieved in about nine months between April to December 2001. This has been a great team effort.” The other two key men in the core team are Sanjay Pathak, VP, ISP, and Himanshu Agarwal, company secretary, finance and administration.

BSES Telecom sources say the much-needed dynamism that was missing from the company’s strategy has been infused again with the help of franchisees. Though broadband to home users is still a critical revenue generation area, the uncertainty of the business has pushed the company into considering other value-added services, which can help in sustaining operations. Of late, BSES Telecom has been more aggressive on the leased line business and Web hosting services. The leased line business is a key growth driver with the company notching up a client list of around 100 customers in a short period of time. Besides, leased lines, which remain a high margin business, have given the company the much-needed cash flows to balance investments made on the OFC network. And most importantly, the company has reportedly roped in management consultants KPMG to formulate a new blueprint for growth.

Also, while previously international raw bandwidth out of its gateway was given to dedicated leased line and broadband customers, the new philosophy is to give shared bandwidth from its gateway, a la VSNL. Adds Chaukar, “We are looking at every possible revenue stream to break even.” Further, the times of big talk and no action are history now and the company is speaking of ground realities and the realistic targets it can achieve.

The company has already laid down approximately 900 km of optic fibre (200 km in the primary network linking 48 receiving stations, around 450 km in the secondary network covering close to 3,500 substations, and around 150 km for last mile connectivity). Also, while previously the plan was to concentrate on the suburbs of Mumbai alone, BSES Telecom is now planning to go all out, but with the help of partnerships. The company won’t make any fresh investments it will only offer its infrastructure and domain expertise and tap new markets with the help of partners.

Company officials also admit that the broadband speeds that BSES Telecom promised simply could not be delivered as it did not make sense commercially. Says a company official on the condition of anonymity, “We too had a ‘follow the herd’ mentality and were simply attracted by the growing Internet base. So even if a building had 20 PCs with Internet connections, we could not convert them all into broadband users as the price to the consumer (around Rs 900 per month) was considered too prohibitive. To convert them all into broadband users, we needed to drop rates to as low as Rs 200 a month, which is simply not feasible. Also, while users argue about the concept of broadband and compare it to global standards, they must also understand that for users abroad, it is ‘local’ bandwidth, while for us, it is international bandwidth, which is expensive.” But company sources do admit that they erred in promising great speeds. The new strategy is to tell the customer the advantage of an always-on connection that gives the benefit of no telephone bills with good access speeds. Leaflets and publicity material that promised great speeds have been withdrawn from the market, as part of this exercise.

The new mantra is consolidation and BSES Telecom wants to grow its base of broadband users around this strategy. For example, the company has around 1,800 broadband subscribers in Bandra in around 930 buildings which translates to roughly two subscribers per building. As wiring has already been done, the addition of a new subscriber in the same building can be done at a minimum incremental cost. The idea is to capitalise on the concept of connected buildings. BSES Telecom now plans to adopt the same approach that cable operators had taken when they spread out in Mumbai and all over the country offer attractive package rates to enable a customer to switch over. The immediate target is to raise the average of two subscribers per building to over five.

Says Dinesh Pinto, an ISP analyst, “When most small ISPs are closing shop and winding up their businesses, due to no return on investment, it is important to note that flashy business models like multimedia and streaming video will not work. BSES Telecom has realised this in time and has started concentrating on a less glamorous but steady business model like leased lines.”

Company officials are also mulling over the possibility of introducing a concept of ‘broadband per hour’ using which a user can avail of broadband packages in the same way that dial-up CDs are used. This concept would only be available to users in buildings where wiring has already been completed. BSES Telecom will simply extend the wiring to the subscriber’s home and enable the user to take broadband connections in the form of 50-hour packages or one-month unlimited packages. Company officials feel packages like these would be in great demand in periods like vacations. The broadband user base is expected to touch the 7,000 mark by the end of this year. Also, on the retail front, the focus is more on broadband than on dial-up. No marketing initiatives have been planned on the dial-up front, with activities restricted to support only (dial-up customers number around 4,000).

BSES Telecom also sees great demand from the education sector, primarily from institutions like the IITs and other premier institutions. IIT Mumbai is already a customer and the company is formulating a separate package for educational institutions. While tie-ups with cybercafes are still on, the focus is to clearly be an infrastructure provider with no ownership or branding. Company sources add that BSES Telecom is also looking at Net telephony as another revenue stream. BSES Telecom is supposedly on the lookout for a strategic partner in this space, and is talking to a number of Internet telephony service providers. In fact, this could well turn out to be a key business area as sources say that marketing efforts would be geared at offering a bundle consisting of both the broadband connection with say, 20 minutes of Net telephony talk time free. BSES Telecom is also making its content pay for itself. Revenues from its portal, Powerscholar.com, which were around Rs 10 lakh last year, are expected to touch Rs 20 lakh this year. The company has already roped in sponsors like Pfizer for corporate sponsorships.

For the fiscal ending March 2002, analysts expect revenues from its ISP activities at around Rs 4 crore, with an additional Rs 2.5 crore coming from the OFC network, and IT services accounting for another Rs 3 crore, in addition to some revenues from meter manufacturing. All this could add up to a turnover of around Rs 10 crore. Though the expected turnover is a small increase over last year, analysts believe that the present focus could enable the company to consolidate its strengths. Moreover, market analysts say that the Reliance factor (Reliance owns 26.8 percent of parent BSES; BSES Telecom is a 100 percent subsidiary of BSES) could actually tilt the tide in the company’s favour as Reliance is arguably the most aggressive player in corporate India. And given the synergies between Reliance’s own mega-ambitious telecom plans and BSES Telecom, it would be in Reliance’s interest to grow BSES Telecom into a position of strength.

Adds Pinto, “While BSES Telecom has been plagued by problems before, the new focus can actually make it one of first ISPs to break even.” While he and other analysts refuse to hedge a bet on when can the break even will actually occur, company sources say that it is a distinct possibility by early-2004. But for that the company needs to retain the current focus and more importantly, the current management team.