ECONOMICS PRESENTATION

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

CONTENT

12/07/2010

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 v producer surplus

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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.
12/07/2010 3

INTRODUCTION

q Formed in october,2000 q World’s 7th largest Telecommunications Company q District headquarters covered618 q No of villages covered- 5.5 lacs. q No of towns covered- 22655

and

cities

q According to June 2009a) wire line subscriber- 28.79 million
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b) wireless subscriber – 54.36 million 12/07/2010

Conti…. q Services provided§ Wire line. § CDMA mobile § GSM Mobile § Internet. Broadband § Carrier service § MPLS-VPN § VSAT § VoIP services § IN Services 12/07/2010 5 .

FIXED LINE STRUCTURE 12/07/2010 6 .

   MISSION q To provide world class State-of-art technology telecom services to its customers on demand at competitive prices.VISION. MISSION AND OBJECTIVES VISION To become the largest telecom Service Provider in  Asia. 12/07/2010 7 . q To Provide world class telecom infrastructure in its area of operation and to contribute to the growth of the country's economy.

8 12/07/2010  . q To provide point of interconnection to other service provider as per their requirement promptly.   OBJECTIVES q To be the Lead Telecom Services Provider. q To facilitate R & D activity in the country. q To provide quality and reliable fixed telecom service to our customer and there by increase customer's confidence.

q Mobile revenues account for nearly half of all telecommunication revenue. q 74 % of all lines in service used wireless access or carried data. q People are using mobile as a primary voice device while the landline is a backup device. 12/07/2010 9 .GLOBAL SCENARIO q Business has been changed since 2000. q Earlier most lines in service used wires and carried voice.

Overview 12/07/2010 10 .

q Total Teledensity is 3. 12/07/2010 11 .108crores( June 2009) q Total 479 million phone connections ( July 2009) q 441.87 and rural teledensity is 1.26.INDIAN SCENARIO q Fastest growing sector in India.22 as per June 2009. q Urban teledensity 7. q 37. q Revenue Rs.66 million connections are wireless.34 million connections are wire line.39.

q Mergers and acquisitions are expected to reduce the number of operators to 5-7. q Broad band subscriber base 25-30 million.EXPECTED GROWTH TILL 2012 q Fixed line subscriber is expected to reach 45 to 50 million driven by broad band growth. q Internet subscriber base 45 million.  12/07/2010 12 .

q The network will be made fully digital. q Rural market will be the next growth driver with the near saturation of urban market..CONT…….  12/07/2010 13 . q Providing telephone connections in villages as per government policies.

ALL INDIA WIRELINE DISTRIBUTION OF BSNL 12/07/2010 14 .

CUSTOMER SERVICES q For help line toll free numbers are there. q Online payment facility. 12/07/2010 15 . q All customer service centers are open from 8 to 8. q Time to time new plans and schemes are introduced.

FACTORS OF PRODUCTION q Employees and labors q Technology q Raw material and machineries   a) copper wires b) telephone instruments    12/07/2010  16 .

q There is an continuous increase in the employee recruitment.IMPACT OF CHANGE IN FACTORS OF PRODUCTION 12/07/2010 q Change in the technology affects the most to the services of BSNL. which affects the expenditure of providing the services q Change in the price of raw materials 17 .

elastic q Emerging substitute goods q Taste and preference q Accessibility of services  12/07/2010 18 .DEMAND DETERMINANT q Price – elastic q Income .

69 52.53 41.6 21.54 17.59 26.22 98.54 40.88 1.2 1.33 40.88 3.34 0.75 Mobile 0.91 40.65 38.58 6.11 16 12 5 5 4 2 2 1 Rate 200-500kms 19 .68 13 33.92 41.CHANGE IN THE DEMAND Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 12/07/2010 Landline 14.77 165.65 32.

CONTI….. 12/07/2010 20 .

q After 2000. q From the year 2002.EXPLANATION 12/07/2010 q In the year 2000. there was an increase in the rates in the BSNL landline services. the rates were at peak. q After 1997. q But later on it started declining. there has been a constant decrease in the rates. q Demand for fixed phones depends on the relative prices of access and 21 . the rates of the landline service remain constant till 2006.

SUPPLY OF BSNL SERVICES 12/07/2010 22 .

q In the year 2009. the wireless increased 12 times more than the wire line.EXPLANATION q In 2004. the wire line was more than the wireless services. 12/07/2010 23 . q After that every year it declined constantly.

CROSS ELASTICITY OF DEMAND 12/07/2010 24 .

INCOME ELASTICITY OF DEMAND FOR BSNL SERVICES 12/07/2010 25 .

10% it reduced to 27.90% and in the year 2009 it came to 72.EXPLANATION 12/07/2010 q The income from the urban areas has increased constantly in the wire line market. q In 2008 it was 70. q But the market share of the rural areas has decreased in these two years.50%. 26 . q From 29.50%.

MONOPOLISTIC COMPETITION MARKET AS PER JUNE 2009 12/07/2010 27 .

HFCL and Shyam. q Earlier it was a monopoly of the Government. Bharti. q There entered many players like Reliance. Tata.EXPLANATION q We consider BSNL as having the Monopolistic competitive market. MTNL.   12/07/2010 28 .

 12/07/2010 29 .BSNL AS A MARKET FAILURE AND MARKET INEFFICIENCY q Improper allocation of resources  q Externalities  q Inequitable distribution of resources.

90 275.89 1218.30 506.30 40753.20 40060.07 1798.80 5412.00 2212.90 -788.87 1810.50 41102.40 41378.50 40566.OPPORTUNITY COST Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 12/07/2010 Direct Exchange DELs added Line annually 32436.75 30 .96 1588.93 1036.00 535.10 37848.90 Waiting List 2947.06 1685.40 5924.

CONSUMERS SURPLUS 12/07/2010 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 q Providing free caller 31 .

PRODUCERS SURPLUS 12/07/2010 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 services 32 .

363 crore in 2008-09. 11.VARIABLE COST   q Remuneration costExpense on staff has increased as Rs.3848 crore in 2001. 12/07/2010 33 . q It is approx 35% of the revenue. q Expense is increasing year after year. q Operating . administrative and other expenses are also approx 35%.02 to Rs.

q Payment of license fee.FISCAL POLICIES q BSNL has to purchase 60% of its equipments from the public sector units(ITI). q Reduce the percentage of Access deficit charge.  12/07/2010 34 . q “ 1*6 rule” introduced by Income tax department.

MONITORY POLICIES 12/07/2010 35 .

q Under.INDUSTRIAL POLICIES q Earlier it was the monopoly of Government sector. the USO( Universal service obligations) the service providers are subsidized for their network expansions cost in rural and remote areas. 12/07/2010 36 . q Low utilization of subsidies by USO. but later on in 1991 due to privatization and liberalization it got opened for the private players.

many subscribers disconnected their landline connections. q Due to 1*6 rule. 12/07/2010 37 .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.

12/07/2010 38 ..Cont…. q Marketing skills are below average. q Political instability q Economic instability. q Urban area market saturation.

custom duty. stamp duty and other 39 . excise duty.IMPACT OF GOVERNMENT POLICIES q Earlier license fee on fixed line was exempted 12/07/2010 q Bundling of fixed line wire q mobile number portability q Spectrum charge – allotment of radio frequency q Octroi .

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.  12/07/2010 41 . q Need improvement in its marketing strategies.

in  12/07/2010 42 .co.BIBLIOGHRAPHY q Dot.in q Trai.in q Bsnl.gov.

  Though the wire line service is reducing at a very fast pace. but it will not vanish completely in the coming future. 43 12/07/2010 .CONCLUSION  Till date there has been no ultimate substitute of wire line services giving the full satisfaction to its customers.

Thank You 12/07/2010 44 .