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Mobile expansion in new geographies has given a fresh lease of life to national long distance (NLD) services. After a negative growth to the tune of 14 percent in FY 2003–04, the NLD services grew by 22 percent in FY 2004–05, thanks to private operators as well as the incumbents. The utility players also helped in growing the market, as there was large infrastructure requirement from the private NLD operators.

According to VOICE&DATA, NLD services in FY 2004–05 were estimated at around Rs 6,261 crore, in comparison to the Rs 5,140 crore in FY 2003–04. In terms of the number of minutes too there has been a significant increase as India added around 17.9 million mobile lines taking the cellular tally to around 52 million lines.

Public Versus Private
Nobody can match the reach of BSNL in terms of microwave and cables laid for long distance network. BSNL, along with the utilities, still contributes around 82 percent whereas BSNL alone contributes around 80.5 percent of the NLD pie. Private players contributed around Rs 1,109 crore of which the majority comes from integrated service providers like Bharti, Reliance, and VSNL. With government targeting 200 million mobile subscriptions in the country by 2007, it is expected that there will be a significant increase in the private operators' market share.

Pure-play Versus Utility
On NLD, there are two kind of players. First, the pure-play players called the NLD (national long distance) operators and second, the IP-II players, which provide bandwidth to NLD operators wherever these players do not have their own links and where redundancy is required. On the national long distance front there are four players-Reliance, Bharti, BSNL, and VSNL whereas there are seven IP-II players of whom Delhi Metro Rail is a recent addition. Other player includes: Gas Authority of India, Power Grid Communications India, Railtel, Tata Power, Tata Power Broadband, and HECL.

The majority of NLD revenues still come from pure-play providers. In FY 2004–05, they contributed around Rs 6,131 crore whereas utilities contributed around Rs 126 crore. In comparison to last year, the contribution from pure-play operators dropped by around 0.7 percentage points and was at 98 percent. In future, with expansion of services being planned in semi-urban and rural areas, one will see a decrease in the contribution made by pure-play operators. This gives enough opportunities to companies like Railtel, PGCIL, and Gailtel for creating a more robust NLD infrastructure in the country.

The NLD Players
In NLD services, BSNL continued to dominate the market with revenues of around Rs 5,041 crore. The company's market share stood close to 81 percent, a drop of around seven percentage points from FY 2003–04. However, it still registered an increase in revenue by 12 percent.

As of March 2005, the company had an installed base of around 500,000 RKm of cable plus microwave network, together covering almost all of India. The network is incomparable to any operators' network. Despite having a large network, the company is continuing to expand in a regular manner. Last year, it installed around 700 Rkm of microwave systems and around 10,000 Rkm of fiber although the target was of around 18,000 Rkm.

Bharti is at the second position with revenues of around Rs 482 crore, a growth of around 41 percent. Its growth is mainly attributable to the landmark deal the company signed with Tata Teleservices for NLD infrastructure sharing. Captive customers too contribute a lot for Bharti.

As on March 2005, the company had an OFC backbone of approximately 29,000 Rkm. Its network is good in northern, western, and southern India but it is pretty weak in eastern India, where it uses the infrastructure from IP-II players.

Reliance Infocomm is number three with revenues of Rs 381 crore. The company grew by around 115 percent. It has embarked upon an ambitious program to cover around 400,000 villages and 5,700 plus towns and cities by December 2005. All this is planned through 80,000 Rkm of optical fiber cable network forming the backbone of its countrywide expansion. This will help in facilitating voice, data, and video applications. Once completed, the network will cover 91 percent of the country's national highways and around 85 percent of rail routes.

With revenues depleting on ILD, VSNL has done pretty well on NLD with revenues of Rs 231 crore in FY 2004–05 and is ranked fourth. It seems VSNL's NLD investment has been justified through revenues and cost rationalization. Presently, NLD contributes around seven percent of the company's total services revenue. From a meager revenue in FY 2003–04, the company showed strong performance and registered 381 percent growth in FY 2004–05. Having realized that the company cannot grow at a fast pace in NLD, the company tied up with Bharti in April 2004 and acquired around 23,000 Rkm of optical fiber cable and this has paid off handsomely for VSNL. Presently, the company has a national backbone of around 30,000 Rkm.

In India, prepaid dominates the market with around 75–70 percent of the total base whereas post paid contributes around 25–30 percent. In terms of churn, the number is at around 8–10 percent of the total base.

Players
In the mobile services space, Bharti is numero uno with market share of 21 percent in subscriber terms and 23 percent in revenue terms. In FY 2004–05, Bharti netted a revenue of Rs 5,436 crore. Bharti's achievement can be attributed to excellent marketing coupled with continuous innovation and an aggressive approach. Presently, majority of Bharti's revenue comes from old circles, which contribute around 98 percent to it. The company also launched services in new circles like Uttar Pradesh (east), West Bengal, Jammu & Kashmir, Bihar, Orissa, Assam, and the Northeast. All these circles are new in terms of operations and contribute around two percent. In FY 2005–06, there would be increased contributions by new circles.

V&D estimates CyberMedia Research

Hutch is at number two position with revenues of Rs 4,365 crore, though in subscriber terms, the company is at fourth position. Hutch has around 18.7 percent market share in revenue terms and 14.9 percent in subscriber term. Hutch's achievement can be attributed to its selective approach of going only to the metros and A and B category circles. The company is hardly present in C category circles and this gives a distinct advantage to the company in terms of ARPU. It has the highest ARPU among all Indian operators, thanks also due to its strong focus on value-added services.

Hutch India is part of Hutchison Telecommunications International, a leading global provider of telecommunication services, which currently serves around nine markets globally of which India is one. In FY 2004–05, the company expanded its operations in three more circles taking the overall tally to 14 circles. However, Hutch is still not present in lucrative circles like Maharashtra and Kerala, and C category circles like Assam, Northeast, MP, Bihar, Orissa, HP, and J&K. In order to have pan-India operations, the company is on the look out for circles through the acquisition route. Though things were moving in the right direction with the Aircel acquisition, it was mutually terminated in FY 2004–05.

Reliance has done pretty well both on the revenue as well as number fronts. Within two years, the company is in the 10 million club. In terms of revenue, the company has done good with Rs 4,089 crore. The company expanded its operations in around 1,400 cities and plans are to afoot reach 5,700 by March 2006.

It is among few companies in the world to report net profit within two years of starting telecom operations, majority of which is in mobile services. In order to rectify mistakes of the past, the company conducted a major exercise and initiated a large churn of around one million subscribers as there were issues of credit worthiness and errors in subscriber data. Now, with the cleaned up operations and clouds of family feud no longer hanging over it, one will see a lot of movement in Reliance.

With the telecom operations of Reliance coming under Anil Ambani, the company has decided to set up a holding company called Anil Dhirubhai Ambani Enterprises, which will have ownership of Reliance Infocomm, Reliance Energy, and Reliance Capital.

BSNL comes fourth with revenues of Rs 3,700 crore and commands around 15.9 percent market share. In subscriber terms, the company has done exceptionally well and is ranked third with market share of around 19.4 percent. The company has done pretty well in the northern and southern regions. The break up of its 10 million is: 1.6 million from eastern zone, 2.1 million from western zone, 2.6 million from northern zone, and 3.7 million from southern zone. In terms of coverage, BSNL has an excellent coverage as far as of district headquarters, national highways, and state highways. The company also has a well spread-out network.

BSNL believes in plain vanilla voice service but this is not what the industry believes. Non-voice services contribute an increasingly significant portion at around 6 percent for the industry as a whole. And that's the reason it has very low ARPUs in comparison to its counterparts. The company has to move at a fast pace and tie up with content providers for non-voice based services. BSNL also has to improve on the marketing front if it plans to generate significant revenues from mobile operations. Presently, mobile revenues of BSNL are not commensurate with its investment plans.

BSNL is also introducing new technologies on the wireless front, to enable broadband services through the wireless media. To a limited extent, data services on mobiles are available on GPRS, which will get augmented further by EDGE deployment, which is part of the 15 million cellular rollout plan.

Idea Cellular is on the fifth spot with revenues of Rs 2,409 crore and has a market share of around 10 percent. In subscriber terms, the company has crossed the five million mark. FY 2004–05 was a turnaround year for the company as it successfully managed the Escotel acquisition and moved into a bigger league with operations in around eight circles. The company is also planning to launch services in circles of Rajasthan, Himachal Pradesh, and UP (E). Idea's success can be attributed to its excellent quality of service, wider distribution reach, and innovative tariff. Having done pretty well in the existing circles, the company is actively focusing on new circles and planning to double VAS revenues.

Tata Teleservices, the unified service operator, has grown by around 73 percent (in number terms) but the company has to do a lot to secure its place in the Top 5 Club. Last year, the company was in expansion mode and launched services in many circles. Now, with infrastructure in place, the company can ramp up its base quickly if it shows more aggression in marketing.

Till March 2005, VSNL's NLD services were rolled out in around 200 locations and there would be a significant addition this year too. VSNL has established points of presence in 109 cities using optical fiber cable and satellite media. The company has already rolled out optical fiber across several states covering northern, western, and southern parts of the country.

In terms of customer acquisition, the company carries traffic for Tata Teleservices, Hutch, Idea, BPL, Spice, and others. With increase in the number of subscribers of Tata Teleservices in different circles, the volumes at VSNL are destined to grow at a fast pace in the future.

IP-II Players
Among all the utilities, Railtel has done pretty well with revenues of around Rs 65 crore. The company registered an impressive growth of 150 percent thanks to its customers: Tata Teleservices, Hutch, Bharti, Essar, Dishnet, and Idea.

Till the end of FY 2004–05, the company had laid down around 23,606 Rkm, of which around 17,452 Rkm have been lit. Presently, the network connects 178 cities and 1,784 railway stations. Plans are afoot to commission around 32,000 Rkm by June 2006. The company also has tower space for installing antennas at 600 locations, of which 30 are being used by mobile operators. The company has plans to build NLD an network of around 40,000 Rkm by March 2007.

V&D estimates CyberMedia Research

With expansion in semi-urban and rural areas, Railtel is planning to reap the benefits, as many railway stations are very close to the cities. Other utilities not being present in east and the northeast of India, will help Railtel in boosting its revenues.

In FY 2004–05, PGCIL did pretty well with revenues of around Rs 27 crore, a growth of 286 percent. Its major customers includes VSNL, Bharti, and Sify.

The company has a robust and strong network in the north Indian states like Jammu and Kashmir and Himachal Pradesh. The company has plans to connect 19,250 Rkm of which 17,650 Rkm is overhead and 1,600 Rkm is underground. The network will interconnect around 60 major cities including all metros and state capitals. Presently, around 14,700 Rkm is operational and the balance is being planned for August 2005. Last year the company added around 8,650 Rkm.

Gailtel was unable to repeat last year's performance and had a negative growth with revenues of Rs 19 crore. Most of its revenue came from Hutch, Idea, and Bharti. Last year, the company was slow in expansion but focused more on creating redundancies.

In terms of network, more than 70 percent of Gailtel's network is along its pipeline and this enhances reliability of the network. Presently, the network is at around 8,500 Rkm with strong presence in north and northwestern states of UP, Rajasthan, Maharashtra, and Gujarat. Plans are in place to connect south India with further expansion of around 5,000 Rkm.

Conclusion
India is moving ahead with a plan of 'One India' plan, i.e., one STD tariff across the country. Presently, the government is still struggling on how to go about operationalizing this plan, as it would not be easy in terms of implementation. But one thing is sure, NLD prices will see a drop in days to come. But whether this leads to positive growth in NLD services is still a big question mark.

Pravin Prashant