The article discusses how state-owned telecom company BSNL is aiming to allocate more staff and resources towards growing its enterprise business segment. It explains how BSNL’s enterprise revenue has declined recently, so it is now taking steps to prioritize enterprise customers and sales.
Analysis of this news for a layman
BSNL stands for Bharat Sanchar Nigam Limited, a state-owned telecommunications company in India. Enterprise business refers to providing telecom services to large business clients, as opposed to individual consumers.
The article states that BSNL has seen its overall revenue from enterprise clients fall 50% over the last two financial quarters. As a result, it is now asking regional executives to shift more of its 54,000 employees, currently only 2%, towards focusing on business clients instead of consumers. This is expected to help BSNL boost sales and reverse declining enterprise revenues.
The declines in BSNL’s enterprise sales likely reflect growing competition from private players like Jio and Airtel who have prioritized business clients. Additionally, BSNL has faced financial struggles in recent years, making it harder to invest sufficiently to acquire and retain high-value enterprise accounts.
Reallocating more staff towards enterprise sales makes sense given the relative importance – enterprise contributes 24% of revenues versus 42% from consumer mobile services. However, effectively competing for enterprise customers will require more than just dedicated sales staff. BSNL needs to ensure its networks and service capabilities meet the reliability, security, and solution integration demands of large business clients.
Upgrading networks requires major long-term capital investments. With BSNL already struggling financially, the risk is that margins get squeezed further in the short term from the high costs of winning enterprise deals before large gains materialize.
Impact on Retail Investors
As BSNL is state-owned, retail investors cannot directly invest or trade shares. However, increased competitive pressure from a re-focused BSNL could negatively impact the growth and profitability of private telecom companies that retail investors can buy stakes in, like Airtel and potentially Vodafone-Idea.
Impact on Industries
The telecom services industry in India could see accelerated enterprise customer churn and margin/pricing pressure if BSNL manages to compete effectively again. This would negatively impact industry profitability over the next 1-2 years.
Additionally, industries that utilize enterprise telecom services like banking, manufacturing, IT services, retail, and logistics could benefit from cheaper rates or specialized products and solutions if BSNL steps up enterprise offerings.
Long Term Benefits & Negatives
If successful in turning around enterprise fortunes, BSNL could benefit from steady, high-margin enterprise revenue helping overall profitability over 3-5 years. It may be able to invest more in next-gen networks.
However, the turnaround could take years to materialize given the financial constraints BSNL faces. Telecom competitors may also aggressively retaliate with price cuts and customer retention incentives, capping upside for BSNL.
Short Term Benefits & Negatives
In the next 6-12 months, BSNL diverting more resources to enterprise could lead to diminished focus on consumer mobile services. Competitors can lure away customers disappointed by declining customer service.
However, BSNL enterprise clients may welcome the increased attention and be willing to expand contracts. BSNL could also attract new accounts from rivals in the short term by undercutting prices while accepting lower margins.
Companies that will gain
Bharti Airtel, Vodafone Idea – stand to gain mobile subscribers from BSNL if consumer service drops initially.
Infosys, TCS, Wipro – large IT services firms that provide solutions to telecom enterprise clients could benefit if BSNL enterprise offerings improve.
BEL, Sterlite Technologies – telecom gear manufacturers may see higher BSNL orders.
Companies that will lose
Bharti Airtel, Jio – face higher competitive intensity for enterprise accounts from a re-energized BSNL.
Vodafone Idea – already falling behind Jio and Airtel, may find it harder to retain enterprise subscribers.
The success of BSNL’s enterprise focus also depends on government support and alignment with digitalization initiatives like smart cities and Make in India that require advanced telecom infrastructure.
If 5G roll-out plans stagnate without viable business models, BSNL may have to settle for modest enterprise gains relying on existing 4G capabilities.
BSNL shifting more resources towards enterprise sales can unlock higher margins but requires long-term capital commitments to improve networks and service capabilities. The financial constraints BSNL faces pose execution challenges, but it has little choice given falling consumer revenue. Competitive disruption for the telecom industry will intensify if the gambit pays off.
Citation: Grover, Jatin. “BSNL to sharpen focus on enterprise business.” The Financial Express.