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BSNL targets 25% rev growth going forward
Published on Mon, Jun 01, 2009 at 11:31 , Updated at Mon, Jun 01, 2009 at 15:38
Source : CNBC-TV18
Kuldeep Goyal, Chairman and Managing Director, Bharat Sanchar Nigam (BSNL), said the growth in revenues had been weak in the previous fiscal. "Average revenue per user took a hit." BSNL, he said, was targeting 20%-25% revenue growth in coming years.
Goyal said formal discussions on a possible initial public offer (IPO) were yet to take place with the government. He added that merger proposal with ITI had been shelved.
Talking about the company's future plans, he said, BSNL hopes to add three million broadband users in FY10. "We would finalise a 93 million GSM line tender soon. We are also looking at tapping Africa and other markets to expand operations."
He expects 3G auction prices not to go very high.
Here is a verbatim transcript of the exclusive interview with Kuldeep Goyal on CNBC-TV18. Also watch the accompanying video.
Q: There is a very high amount of hope on perception that your IPO will get done in the next few months, are you getting that filler from the government that 10% float is very likely soon?
A: The newspapers talk about it, the formal discussion with government is yet to take place on that issue. Thus, we have to see what the government expects when discussions take place.
Q: Earlier, there have been talks between a merger with Maharashtra Telephone Nigam Ltd (MTNL). I also believe that ITI has put in a proposal to merge with BSNL—are these two under consideration at the board level or have you rejected them outright, any possible merger with ITI or even at MTNL?
A: As far as ITI merger is concerned, the case was considered by the board and it was felt that it was not in the interest of the company. That recommendation was sent to the government and I think the government also decided not to go with it at the moment. As far as MTNL is concerned, there has not been any consideration or any dialogue on that with BSNL. Hence, I would not be able to say what the government is thinking on that right now but I think government expects that BSNL should first get listed probably before merger with MTNL can be considered.
Q: This approval for 10% divestment happened last year, has that lapsed or does that still hold in the sense that if BSNL looks to raise money will it be 10% or could it possibly be more than that?
A: That was the recommendation that BSNL made to the government. So there is no lapse of that recommendation. The government has to take a call now.
Q: Can you walk us through the kind of growth BSNL has seen? Some people are talking about FY09 growth or revenues of about Rs 45,000-50,000 crore, is that the target that BSNL is probably going to close FY09 up with or has already closed?
A: The growth of revenue in the last year has been around flat or slightly less than the previous year because the expansion has not happened to the extent it was desired. We added 10 million plus connections in mobile and there was a reduction of two million roughly in the landline.
Thus, the overall growth was around 8-8.5 million last year and ARPUs fell much more. Hence, the growth in revenue has not been to that extent. We expect that in the years to come, growth of 20-25% is what we are aiming at now, in terms of revenue.
Q: How swiftly would you be able to move ahead with your expansion now because the fact that you could not implement your expansion plans on time might have benefited many of your competitors in the telecom space? Do you think this year you can play catch up and implement and can you give us a roadmap for what kind of implementation you are looking at?
A: This year we already have 35 million lines equipment of mobile which is in the network being rolled out so the expansion is already happening. In addition, beyond this year, for the next three years as well, our process for procurement of equipment is in place. So I think there is going to be good growth from this year.
We definitely look forward to a good growth on broadband also. We have been growing very good on broadband, our market share is 57%—it increased from 50% to 57% last year. This year also, we intend to add three million broadband connections to the existing 3.5 million.
Hence, both on mobile and broadband, we are very hopeful. As far as broadband is concerned, we are going to rollout in this year through WiMax technology and again both wire and wireless broadband would be a good growth area in this year.
Q: On the disinvestment side, it will be the government’s call when to go ahead with it but at the executive management level, what is your thinking, would you want to raise any capital given your expansion plans or you are okay with just the government selling stake to raise the capital for itself in the offer of 10%?
A: In the immediate future, for this year maybe, there is no need for capital directly. But, for the years to come definitely there would be a need of capital for growth which is planned and with the 3G WiMax auctions’ amounts—not known as what they would be—we would need capital in subsequent year and therefore we will look at raising the capital in subsequent years through the listing of the company.
Q: What kind of estimated cash outgo you might have because of oppose the 3G auctions?
A: That would be difficult to say but I think it should not be that high. We hope that it has to be higher than the price being talked of—Rs 2,000 crore or Rs 3,500 crore. But I think there will be pragmatism and it should not go very high. That is what we expect.
Q: You had a very large expansion plan as well—about 93 million lines. Can you walk us through whether or not that order has been allocated or divided up and whether ITI as well is a beneficiary over there?
A: This 93 million procurement process is already on. We have opened the financial bids and we are likely to finalise those soon. However, as far as the ITI is concerned, they are doing work in the West and South zone for nine million expansions each. I think that is huge work which ITI is right now doing.
Q: In the Union Budget, if the government expresses the intent of going ahead with the 10% BSNL IPO, do you think it will meet with any kind of resistance from your workforce, the unions etc or once the government makes up its mind, it is a very easy process to go through with it?
A: The majority union of the non-executives has opposed the IPO earlier and so also some of the executive association. But a few associations especially with the young engineers have welcomed the idea. I feel that there would be some resistance initially but once we talk to the unions and the honourable ministers, when these steps are taken and it is explained to them, we hope that IPO should be able to go through.
Q: How long do you think the negotiations will take because this issue has come in the past and there has been opposition which has been voiced as you said, what makes you confident that at a union level you will be able to convince them this time around?
A: The process can go in parallel; the whole process of IPO itself will take anywhere between six months or so from the time the decision is taken. Meanwhile the discussions with the unions also can go on and they can be explained the benefits of it because BSNL is probably the only large incumbent operator worldwide which is not listed even our neighbours like Pakistan, Bangla Desh, China, all have listing. For our international foray we need to have listing. So once we talk of all those benefits, I am hopeful that we should be able to convince the staff and once they see the benefits for themselves, they will be willing to accept it.
Q: Last time the telecom minister spoke about the valuations of USD 11 billion for BSNL which raised quite a few eyebrows; do you think given current market conditions, you would gun for something like that? Is that in your eyes the fair value of BSNL?
A: Once the decision is taken and the valuation is done by the companies which are appointed for that, we will see. I would not like to comment as to what valuation can be expected.
Q: You indicated there is an international foray for which you require a listing, what international foray is that?
A: We are trying to move out into the markets where there is a potential for growth especially the African markets and if we have to venture into those markets, naturally listing will help us in proper evaluation of BSNL by those operators there.
Last updated on 02/06/2009
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