Bharti Telenet CEO K Krishnan talks about his company's success in India's crowded telecom market and its future plans

Chennai: Gone are the days when voice connection drove the data and Internet traffic for basic telecom players. "Today, it is the other way round," says K Krishnan, CEO, Bharti Telenet, which offers basic telephony in the south Indian states of Tamil Nadu and Karnataka.

With the government-owned Bharat Sanchar Nigam Ltd (BSNL) well entrenched in the fixed voice telephony and the mobile players - cellular and wireless - in the local loop (WLL) queering the market pitch, the private basic telephony players have to offer something different to be of relevance to the customers. It is where fast-data connectivity at affordable rates comes into play.

Service providers know this. Bharti Telenet recently introduced new schemes to attract dial-up Internet users to its digital subscriber line (DSL) connection. It's competitor, Tata Teleservices, has signed with Dishnet DSL, an Internet service provider (ISP), to offer broadband net access to its subscribers.

Krishnan, a 48-year-old old chartered and cost accountant, started his career with the audit firm AF Ferguson. He later moved on to the corporate world - first with Coromandel Fertilisers and later with the RPG group. "I was with the RPG group for 10 years," he says.

He spent first four years with Fujitsu ICIM, heading the finance and manufacturing operations. In 1994, he moved to Chennai to head RPG Cellular Services. Three years later, Krishnan went to Kolkata as managing director of Saregama India, the RPG group's music business.

"In January 2001, I came back to Chennai to head this company," he says. The company started its services in July 2001, first in Chennai and expanded its operations to other cities like Tirupur, Coimbatore, Vellore and Hosur in Tamil Nadu. Later it branched out to Karnataka and Pondicherry.

"In Tamil Nadu, we are in the process of sizing up the market - whether pure voice or data potential would run here - in cities like Trichy, Tuticorin and Tirunelvelli," he says. Similar sizing-up is being made in Mysore, Udipi, Manipal, Hubli and Belgaum in Karnataka. Bharti Telenet presence is also felt in Bangalore and Mangalore in Karnataka.

"The company will be investing around Rs 100 crore in each state in one year's time. Going by the current trends, the company will close this fiscal with a turnover of Rs 500 crore," he is confident. Krishnan spoke to domain-b recently. Excerpts:

Has the entry of WLL CDMA [code division multiple access] phone service from Tata Teleservices and Reliance Infocomm impacted the sales of your basic telephony?
No impact at all; most market segments are now driven by the quality of service and the cost of usage. In Tamil Nadu, we have only BSNL as our competitor in the fixed wire line telephony. We are addressing a different market. Our focus is small and medium enterprises and the data traffic market. Even the choice of telecom circles (areas of operations) is based on the data potential that is there to be tapped and not the voice telephony market. In the last three years, the data services have registered a sharp growth. Our focus is on pushing that; voice service is incidental.

How much have you invested in Tamil Nadu and Karnataka? What is your additional investment plan?
We have invested Rs 380 crore [Rs 220 crore in Tamil Nadu and Rs 160 crore in Karnataka]. We have plans to invest Rs 100 crore more in each state.

What are your subscriber base and revenue in both these states?
We have around 1.2-lakh subscribers [80,000 in Tamil Nadu and 40,000 in Karnataka]. Both states put together, we clock around Rs 40 crore per month, and will be closing this fiscal with a turnover of around Rs 500 crore. In Tamil Nadu, we expect to earn around Rs 300 crore. Last year it was Rs 150 crore.

Your subscriber profile in Tamil Nadu…
Residential connections account for 23,000 and the balance consists of corporates and small and medium enterprises. Our Internet subscriber base is around 21,500 [dial-up: 18,000; DSL: 3,500]. The home segment customers are not price-sensitive but demand value-addition. It is this aspect that decides the switch to us. The upper-end of this segment uses international calls a lot. And we pass on to them a part of our revenue from long-distance service providers in the form of discount in the total bill. On the customer service side, our fault rate is less than 2 per cent and 98 per cent of the faults are cleared in less than two hours' time.

How are your other services [Centrex and virtual private network (VPN)] doing?
We have a great demand for Centrex. Large corporates, buildings and residential complexes use Centrex services. Similarly, VPN is also being received well. For instance Tube Investments has put 43 of their centres under our VPN activity. The advantage is that all the activity is under our control.

But the VPN market is very competitive with ISP's like Dishnet DSL offering cheap rates…
We are also competitive. The one advantage with us is that the entire service activity is controlled by us - connectivity, bandwidth and others - whereas in the case of other service providers it is not so.

How different are the Chennai and Bangalore telecom markets?
Bangalore is more of a corporate market and the market size is nearly double that of Chennai's. In terms of the overall market size, the Bangalore voice market is around Rs 850 crore while it is Rs 1,200 crore for Chennai. Nevertheless, Bangalore ranks ahead in the data market with Rs 180 crore as the market size while it is Rs 100 crore in Chennai.

There are more towns with potential in Tamil Nadu than Karnataka. Otherwise, there isn't much difference between these two markets, as the usage pattern is similar. For the service providers, the big difference between the two states is the track-rent. The Tamil Nadu government collects Rs 9,000 per km of cable laid as track-rent, where no other state levy such a charge. We have laid around 9,000 pa/km and the track rent is a substantial outgo for us.

How many PCOs do you have in Tamil Nadu and Karnataka? What are you retail distribution plans?
In Tamil Nadu we have around 4,000 PCOs and in Karnataka it is 2,000. Our PCO operators also sell our virtual calling cards and AirTel's SIM cards. On the retailing front, we have some retail outlets now. We plan to set up more small units across the city so that our customers feel comfortable. We are also thinking of using AirTel outlets to cross-sell our services. Apart from own outlets we have seven franchisees in Chennai, two exclusively for DSL. In other cities, too, we have franchisees.

With the opening up of the telecom market there are several service providers in one city. And there is a dire need for a common telephone directory. Is there any move towards that?
We are planning to bring out a directory listing out our subscribers. As regards the single common directory, it will take time for the companies to share the information.