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BSES hops onto ISP bandwagon - Views on News from Equitymaster
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  • Sep 27, 1999

    BSES hops onto ISP bandwagon

    BSES hops onto ISP bandwagon BSES Telecom, subsidiary of BSES Ltd, plans to launch its Internet services by the first week of November 1999. This was reported by a leading financial daily.

    BSES a is power distribution and generation company with an exclusive licence to distribute power in Bombay's northern suburbs. It has a consumer base of over 1.8 m consumers. The company has made a foray into the telecom services business by launching BSES Telecom.

    Competition in the Internet Service Providers (ISP) business has increased considerably since this segment was thrown open to the private sector last year. The Department of Telecommunication (DoT) has issued more than 150 licences already.

    BSES Telecom in a bid to differentiate itself from the existing providers will offer extra-net services for all BSES electricity consumers at reasonable rates. A fresh round price war seems to be in the offing as BSES will try to attract subscribers away from MTNL and VSNL. In the future, BSES plans to provide value-added Internet services.

    BSES given its existing infrastructure in the power business will have an edge over other ISP licencees like Satyam Infoway and Mantra On-line. It plans to use its optical fibre network (that links its power stations) for its Internet business. BSES already has a database of 1.8 m consumers (for its power business), for whom BSES may be the preferred ISP, in view of the additional services that they will receive.

    The ISP business makes a lot of sense for BSES, given the synergies with its existing power distribution business. Moreover, with its greater financial muscle, it can withstand price-cutting measures from existing ISPs like MTNL and VSNL. With Internet and e-commerce awareness catching on in India, analysts estimate the rate of Internet subscription to increase manifold over the next few years. BSES will be major beneficiary of the boom in subscriptions. Market view:

    As far as its power business is concerned, analysts are impressed with BSES' cost efficient performance, and are optimistic of the company's ability to improve upon it further. They have recommended the stock as a 'BUY'. However, the ISP business will involve heavy investments and is expected to put pressure on the company's resources in the short term.



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