Tata, Reliance offices go for own connections

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Tata, Reliance offices go for own connections

Source: Business Line News, March 10, 2004

IN what could spell trouble for BSNL and MTNL, the Tatas and Reliance are completing the task of enrolling their employees and wiring up the offices of group companies with telephone connections provided by their respective telecom companies, Tata Teleservices Ltd (TTSL) and Reliance Infocomm.

While the Tata group has been able to do so only in the six circles that Tata Teleservices operates in, Reliance Infocomm has a much larger footprint across the country and is faster in getting its employees and group companies to switch over from BSNL or MTNL.

According to industry sources, the conversion of company employees is more in the mobile segment, which may not have much impact on the PSUs.

Instead, what should make a dent in the revenues of BSNL and MTNL is the large-scale replacement of the landline connections in the offices of group companies, particularly since the corporate sector accounts for a sizeable chunk of telephone revenues.

Retail customers account for only around 30 per cent of the revenues of the telecom companies since the landline rates are subsidised.

However, the value-added services for the corporate sector including virtual private networks, leased lines and broadband solutions are the main revenue generators, sources said.

Given the fact that the Tata group has control over 93 companies in diversified sectors and Reliance controls as many as 10 companies, the "potential market" lost by BSNL and MTNL could be quite big.

What is more, the Tata group also has under its control 54 hotels at 34 locations in India and abroad. The hotels located in the six circles where Tata Teleservices has a licence have already switched over to Tata Indicom. TTSL has applied for licences in seven fresh circles, and once it starts rolling out the services, the remaining hotels too will be rewired.

Tata officials said that in Delhi, for instance, close to 50 per cent of all group companies have switched over to TTSL from MTNL. Interestingly, however, the MTNL landline connections in the offices have not been discontinued but are being used only for incoming calls.

For outgoing calls and other value-added services, the Tata Teleservices lines are being used. "This is because of our long-standing relationship with MTNL. We do not want to discontinue their connections overnight. All the Tata employees have, however, shifted over their landline and mobile connections," the source said.

They added that the remaining 50 per cent of the Tata companies would switch over to TTSL once the task of laying optical fibre cables (OFCs) is completed in the rest of the Capital. A similar situation exists in all the other cities where the Tata group has offices. These are just the potential customers lost on account of Tata and Reliance.

Bharti, which also offers landline connections, is also luring other corporate customers away from BSNL and MTNL. Officials of the Tata and Reliance groups were not willing to comment on the revenue that they have been managed to wean away from the incumbent operators.

But unless the PSUs gear themselves up to retain the existing corporate customers, they could take a big hit in the months to come.

Edited March 11, 2004 by Ashokjp