Risky strategy
Managing Director Kuldeep Goyal has frequently spoken of BSNL’s desire to expand internationally, especially in Africa. And though it doesn’t make public the information, the company is reported to have a strong balance sheet.
But “international expansion is a risky strategy for BSNL,” says Gupta. “[BSNL] are trying to run before they can walk. An acquisition overseas takes lot of effort, so guess where the management’s focus would be if it were to happen. Such an acquisition could further hit BSNL’s Indian operations.”
A domestic acquisition won’t to be easy either. “In a competitive global as well as domestic market, BSNL will find it difficult to pull off an M&A because of its present structure,” said a telecom analyst close to the company. “Management needs to be able to take decisions and run with those, there needs to be structures in place to support an acquisition. BSNL has none of that.”
The company’s $10 billion tender for 93 million GSM lines has now been delayed for over 18 months, putting its network expansion plans on ice at a time the country’s mobile subscriber base is rapidly growing. The result has been a further loss of market share.
The Central Vigilance Commission is investigating the deal for possible irregularities amid reports BSNL agreed in post tender negotiations to pay Ericsson 130% more than it had earlier quoted for the north and east region contracts. If BSNL is made to junk the tender it will push back its network upgrade timetable even further.
As of December 2009, BSNL had a subscriber base of 59.5 million, or 15% of the market, compared to 30.9% held by market leader Bharti Airtel, according to figures from the Cellular Operators Association of India (COAI).