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India Update: IPO Plan, WiMax Auction

Having been shelved earlier this year because of political and employee opposition, a potential IPO of Indian state-owned operator Bharat Sanchar Nigam Ltd. (BSNL) is back on the agenda.

In January, the government and the carrier suggested that about 10 percent of the company's stock could be floated to raise about $10 billion, but the idea was shot down amid fears that it could lead to a mass reduction in BSNL's workforce of around 320,000. (See BSNL Considers $10B IPO.)

Now the plan is back on the table, with Bloomberg reporting that the Indian government still has a 10 percent stake sale in mind to raise money for new network rollouts, including a 3G mobile network build. (See India Edges Closer to 3G.)

But the BSNL staff union, which represents more than 300,000 employees at the national carrier, is still vehemently opposed to the IPO, with Indian newspaper The Standard reporting the head of the union saying that an IPO would lead to an indefinite strike, and that the union isn't interested in the offer of stock options for its members.

In its most recently reported full financial year (to the end of March 2007), BSNL, which currently has 42 million mobile and 39 million fixed-line customers, generated revenues of $9.4 billion and a net profit of $1.85 billion.

According to the Telecom Regulatory Authority of India (TRAI) , BSNL generated revenues of 107.5 billion rupees ($2.56 billion) in the three months to the end of March this year.

WiMax spectrum to be auctioned
Whatever happens with the IPO plans, BSNL knows it'll have new wireless spectrum soon to launch 3G and WiMax services, because, not only is it being handed some 3G spectrum by the government, it's also being awarded a 20 MHz chunk of spectrum for wireless data services.

India's Department of Telecommunications (DoT) is to award four blocks of spectrum in each service area (known as a circle) -- two 20 MHz blocks in the 2.3 GHz band, and two in the 2.5 GHz band. The service licenses that go with the spectrum will last 15 years.

The DoT says wireless data spectrum in the 700 MHz and 3.3 to 3.6 GHz bands will be awarded later. Tata Communications Ltd. has already launched fixed WiMax services in the 3.3 GHz band. (See Tata Unleashes WiMax in India.)

The setup for the WiMax spectrum is the same as with the 3G airwaves: BSNL and India's other state-owned operator, Mahanagar Telephone Nigam Ltd. (MTNL) , don't have to take part in the auction process, as they are guaranteed some spectrum. MTNL will get spectrum in the New Delhi and Mumbai metro circles, where it currently offers fixed and mobile services, and BSNL will be awarded a block in the other 21 service circles that cover the rest of India. (See A Guide to India's Telecom Operators.)

Both carriers, though, will have to pay the same price as everyone else for their spectrum, with the price being equal to the highest bid at the end of the auction process.

The system clearly favors BSNL and MTNL, as they can start planning their networks and services now, safe in the knowledge that they'll have spectrum awarded, while their rivals have to allocate resources to the auction and devise a strategy for the auction process, not knowing whether they will end up with any spectrum.

The move has been applauded by the WiMAX Forum , which has been certifying products that work in the 2.3 and 2.5 GHz bands. The Forum says it will set up an Indian certification lab before the end of this year. (See WiMAX Forum Applauds India.)

And the move will naturally create business opportunities for WiMax equipment vendors, with the likes of Alcatel-Lucent (NYSE: ALU), Motorola Inc. (NYSE: MOT), and local firm Telsima Corp. ready to respond to RFPs (requests for proposals).

But the DoT's move has also been criticized by some ISPs that were handed some 2.5 GHz spectrum in 2003 and have now been asked to hand it back. For details of that potential flashpoint, see this Economic Times article.

— Ray Le Maistre, International News Editor, Light Reading


Interested in learning more on this topic? Then come to Broadband 2.0: Making the Business Case, a 2-day roadshow that will provide attendees from among India's fixed and wireless carrier communities with an exclusive and intensive overview of how broadband wireline and wireless services can be enhanced to improve ARPU, ROI, and churn. The event will be staged in New Delhi on September 10 and Mumbai on September 12.


kumaramitabh 12/5/2012 | 3:34:40 PM
re: India Update: IPO Plan, WiMax Auction Even though the BSNL unions are opposed to the IPO, it may be a compulsion for BSNL as it is required to pay for spectrum at the same rates, which is discovered in the auctions to other bidders in both 3G and WiMAX areas. This together with the countrywide rollout of these services would require considerable amount of funding. Its present and projected cash flows may not support such expanditures.

BSNL holds a good promise for WiMAX as it is the only agency which is truely into rural ( and countrywide ) broadband. Neverthless its equipment procurement procedures would still mean at least a year before the WiMAX networks cover a significant area. Its services, though delayed, are robust once commissioned.

The issue of sales and packaging of the services, customer care and user device support is however entirely a different area. The policy makers have been quite pragmatic in announcing Mobile Virtual Network Operators ( MVNOs) in so far as the cellular mobile services are concerned. This means that an operator like BSNL, with a countrywide footprint can focus on the infrastructure, while letting innovative services being sold through MVNOs.

Such a provision is also needed in the WiMAX area. Virtual WiMAX network Operators ( VWNOs) if licensed can help raise the realization from the infrastructure which is built up and let customers have the pleasure of using innovative mobile multimedia services and new devices.

It is unlikely that any other bidders will deplay Mobile WiMAX in the way BSNL propose to do as the 2.3 and 2.5 Ghz bands are now also open for use in 3GPP networks.

It will be a good move for the regulators to license the WiMax Virtual Network operators.

http://www.wimaxbook.net
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