• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
  • Editorial Calendar 19-20
BW Businessworld

Dropping The (Wrong) Call

Photo Credit :

Battered and bruised by huge losses for two years in succession, and losing market share in the remunerative telecom services business, Bharat Sanchar Nigam (BSNL) has fallen back on its infrastructure to bolster its finances. The state-owned telco is imposing an interconnection charge of 40-85 paise per minute for connecting calls to its estimated 24.5 million fixed line subscribers.

It hopes to increase its revenues by about Rs 1,800 crore by billing private telecom operators (from March 2009) for the use of its network and infrastructure, the biggest in India. The interconnection charge has two components — a termination charge or the cost of connecting a call to another operator's network (proposed at 40 paise per minute), and a carriage charge or the charge for carrying it to the last-mile connection (proposed 85 paise per minute).

Interconnect charges gave BSNL Rs 3,000 crore in revenues, compared to Rs 9,800 crore in income from providing tele services. "We have to fulfil a promise of our minister," snaps a senior officer in BSNL's finance department, when quizzed about this sudden hurry to generate interconnect bills.

Private operators have been caught off guard. "We have been writing to BSNL regularly that the billing is incorrect; now, they are pressing for its realisation," says a senior executive from Bharti Airtel. They are furious, but hesitant to go to court — they will have to immediately cough up 50 per cent of the bills raised by BSNL.

R.S. Mathews, director-general, Cellular Operators Association of India, says BSNL has wrongly reported the entire issue and no amount is outstanding. "BSNL is unfairly trying to charge a higher amount of 65 paise per minute for such calls from all the private operators," says Mathews. R.K. Upadhyay, BSNL's chairman and managing director, retorts that only carriage charges were charged, not termination charges.

The Telecom Regulatory Authority of India (Trai) had allowed a termination charge of 20 paise per call and a carriage fee of 15 paise in its 2003 order. BSNL contested this and the matter went to the Telecom Dispute Settlement Appellate Tribunal in 2009, and then to the Supreme Court. The matter is pending, but BSNL was allowed to bill private operators till 2009.

Trai's revised interconnect order in February 2006 stipulated a flat rate of 65 paise, based on negotiations. "BSNL conveniently picked a para from the 2006 order of Trai (that is sub-judice) and billed on flat rate without negotiating," alleges a senior executive of Idea Cellular.

BSNL's ‘crackdown' may be overdue, but that does not absolve its management of developing an effective business strategy. Nothing prevents them from unbundling the firm into services, infrastructure and maybe a consulting company. The fight highlights the value of BSNL's robust infrastructure.

While private telcos are trying to run on infrastructure they built over the last 15 years, BSNL has not even thought about its corporate strategy in any meaningful way. Regaining market share — BSNL's share dropped from 18 per cent in 2009 to 11 per cent in 2010 — is going to take a lot more than getting into a dogfight with the bigger and better private operators.

(This story was published in Businessworld Issue Dated 26-09-2011)