ECONOMICS

PRESENTATION

TOPIC - BSNL
PREPARED BY-
JIGAR PATEL
A.P.ANU
SUJAL SHETH
12/07/2010 1
 CONTENT

v Introduction
v Factors of production
v Demand determinant
v Supply of services
v Cross elasticity of
demand
v Income elasticity of
demand
v Perfect competitive
market
v Market failure and
inefficiency
v opportunity cost
v Consumer surplus
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v producer surplus 2
 INDIAN TELECOM SECTOR

q India is the second

largest telecom
industry after
China( subscriber
base), with
lowest tariff rate.
q It is contributing
2.71% to the
total GDP.
q Subscriber base is
growing as 6
million every
month.
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 INTRODUCTION

q Formed in october,2000
q World’s 7th largest
Telecommunications
Company
q District headquarters covered-
618
q No of villages covered- 5.5
lacs.
q No of towns and cities
covered- 22655
q According to June 2009-
 a) wire line subscriber- 28.79
million
 b) wireless subscriber – 54.36
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million 4
 Conti….

q Services
provided-
§ Wire line,
§ CDMA mobile
§ GSM Mobile
§ Internet,
Broadband
§ Carrier service
§ MPLS-VPN
§ VSAT
§ VoIP services
§ IN Services
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 FIXED LINE STRUCTURE

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 VISION, MISSION AND OBJECTIVES

VISION
To become the largest telecom Service

Provider in  Asia.



MISSION


q To provide world class State-of-art

technology telecom services to its
customers on demand at competitive
prices.

q To Provide world class telecom

infrastructure in its area of operation
and to contribute to the growth
12/07/2010 of the country's economy. 7
 

OBJECTIVES


q To be the Lead Telecom Services

Provider.
q To provide quality and reliable fixed
telecom service to our customer and
there by increase customer's
confidence.
q To provide point of interconnection to
other service provider as per their
requirement promptly.
q To facilitate R & D activity in the
country.
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 GLOBAL SCENARIO

q Business has been changed since

2000.
q Earlier most lines in service used
wires and carried voice.
q 74 % of all lines in service used
wireless access or carried data.
q Mobile revenues account for
nearly half of all
telecommunication revenue.
q People are using mobile as a
primary voice device while the
landline is a backup device.
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 Overview

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 INDIAN SCENARIO

q Fastest growing sector in India.

q Revenue Rs.39,108crores( June 2009)
q Total 479 million phone connections
( July 2009)
q 441.66 million connections are
wireless.
q 37.34 million connections are wire line.
q Total Teledensity is 3.22 as per June
2009.
q Urban teledensity 7.87 and rural
teledensity is 1.26.
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 EXPECTED GROWTH TILL 2012

q Fixed line subscriber is expected

to reach 45 to 50 million driven
by broad band growth.
q Mergers and acquisitions are
expected to reduce the number
of operators to 5-7.
q Broad band subscriber base 25-30
million.
q Internet subscriber base 45
million.


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 CONT……..

q Rural market will be the next growth

driver with the near saturation of
urban market.
q The network will be made fully digital.
q Providing telephone connections in
villages as per government policies.


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 ALL INDIA WIRELINE DISTRIBUTION OF
BSNL

12/07/2010 14
 CUSTOMER SERVICES

q For help line toll free numbers are

there.
q All customer service centers are
open from 8 to 8.
q Online payment facility.
q Time to time new plans and
schemes are introduced.

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 FACTORS OF PRODUCTION

q Employees and
labors
q Technology
q Raw material and
machineries
 a) copper wires
 b) telephone
instruments


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 16
 IMPACT OF CHANGE IN FACTORS OF
PRODUCTION

q Change in the
technology affects
the most to the
services of BSNL.
q There is an
continuous increase
in the employee
recruitment, which
affects the
expenditure of
providing the
services
q Change in the price
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of raw materials 17
 DEMAND DETERMINANT

q Price – elastic
q Income - elastic
q Emerging
substitute goods
q Taste and
preference
q Accessibility of
services


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 CHANGE IN THE DEMAND

Year Landline Mobile Rate

1997 14.54 0.34 200-500kms

1998 17.6 0.88

1999 21.59 1.2

2000 26.65 1.88 16

2001 32.65 3.58 12

2002 38.33 6.68 5

2003 40.91 13 5

2004 40.92 33.69 4

2005 41.53 52.22 2

2006 41.54 98.77 2

2007 40.75 165.11 1

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 CONTI…..

12/07/2010 20
 EXPLANATION

q In the year 2000, the rates

were at peak.
q After 2000, there has been
a constant decrease in the
rates.
q After 1997, there was an
increase in the rates in
the BSNL landline
services.
q From the year 2002, the
rates of the landline
service remain constant
till 2006.
q But later on it started
declining.
q Demand for fixed phones
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depends on the relative
prices of access and
21
 SUPPLY OF BSNL SERVICES

12/07/2010 22
 EXPLANATION

q In 2004, the wire line

was more than the
wireless services.
q After that every year
it declined
constantly.
q In the year 2009, the
wireless increased
12 times more than
the wire line.

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 CROSS ELASTICITY OF DEMAND

12/07/2010 24
 INCOME ELASTICITY OF DEMAND FOR BSNL
SERVICES

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 EXPLANATION

q The income from the

urban areas has
increased constantly in
the wire line market.
q In 2008 it was 70.90% and
in the year 2009 it came
to 72.50%.
q But the market share of
the rural areas has
decreased in these two
years.
q From 29.10% it reduced
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to 27.50%. 26
 MONOPOLISTIC COMPETITION MARKET AS
PER JUNE 2009

12/07/2010 27
 EXPLANATION

q We consider BSNL as having the

Monopolistic competitive market.
q Earlier it was a monopoly of the
Government.
q There entered many players like
Reliance, Tata, Bharti, MTNL, HFCL and
Shyam.


12/07/2010 28
 BSNL AS A MARKET FAILURE AND MARKET
INEFFICIENCY

q Improper
allocation of
resources


q Externalities


q Inequitable
distribution of
resources.


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 OPPORTUNITY COST

Year Direct Exchange DELs added Waiting List

Line annually
2000-2001 32436.10 5924.80 2947.06

2001-2002 37848.20 5412.00 1685.87

2002-2003 40060.50 2212.30 1810.07

2003-2004 40566.50 506.00 1798.96

2004-2005 41102.40 535.90 1588.89

2005-2006 41378.30 275.90 1218.93

2006-2007 40753.40 -788.90 1036.75

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 CONSUMERS SURPLUS

q Different types of
plans being
introduced
q Providing services
to the rural and
remote areas at a
relatively cheaper
price
q Providing rebates to
the customers for
paying annual rent
in advance
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q Providing free caller 31
 PRODUCERS SURPLUS

q Up to 2006, government
was giving compensation
on IUC( Inter usage
charge).
q Government is paying
BSNL for providing
telephone services as
VPT ( Village public
telephone) to the
villages.
q USOF( universal service
obligation fund) by the
Government for providing
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services 32
 VARIABLE COST

q Remuneration cost-
Expense on staff has
increased as Rs.3848
crore in 2001- 02 to
Rs. 11,363 crore in
2008-09.
q It is approx 35% of the
revenue.
q Operating ,
administrative and
other expenses are
also approx 35%.
q Expense is increasing
year after year.
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 FISCAL POLICIES

q BSNL has to purchase 60% of its

equipments from the public sector
units(ITI).
q “ 1*6 rule” introduced by Income tax
department.
q Reduce the percentage of Access
deficit charge.
q Payment of license fee.


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 MONITORY POLICIES

12/07/2010 35
 INDUSTRIAL POLICIES

q Earlier it was the monopoly of

Government sector, but later on in
1991 due to privatization and
liberalization it got opened for the
private players.
q Under, the USO( Universal service
obligations) the service providers are
subsidized for their network
expansions cost in rural and remote
areas.
q Low utilization of subsidies by USO.

12/07/2010 36
 RISK AND UNCERTAINITIES INVOLVED

q USO’s focus has been

diverted from the
fixed phones to the
mobile phones
q Recovery of
customers payment
is uncertain.
q Due to 1*6 rule,
many subscribers
disconnected their
landline
connections.
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 Cont…..

q Political instability
q Economic instability.
q Urban area market
saturation.
q Marketing skills are below
average.

12/07/2010 38
 IMPACT OF GOVERNMENT POLICIES

q Earlier license fee

on fixed line was
exempted
q Bundling of fixed
line wire
q mobile number
portability
q Spectrum charge –
allotment of radio
frequency
q Octroi , custom duty,
excise duty, stamp
12/07/2010 duty and other 39
 SUGGESTIONS FOR IMPROVEMENT

q Excessive non
executive
employees should
be given voluntary
retirement or should
be continued on
contractual basis.


q Services should be
more quick for
customer
satisfaction.

12/07/2010 40
 Cont…

q Awareness of services and their cost for

subscribers is essential to promote the
higher utilization of the provided
services.
q Reexamination of present design of
subsidization.
q Need improvement in its marketing
strategies.


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 BIBLIOGHRAPHY

q Dot.gov.in
q Bsnl.co.in
q Trai.in


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 CONCLUSION

 Till date there has been

no ultimate substitute
of wire line services
giving the full
satisfaction to its
customers.


 Though the wire line

service is reducing at
a very fast pace, but it
will not vanish
completely in the
coming future.
12/07/2010 43
 Thank You

12/07/2010 44