This story is from January 26, 2008

Once upon a monopoly

T Surendar / TNN / Jan 26, 2008, 01:38 IST

Share

AA

Text Size

Small
Medium
Large

In the last few years, with the advent of new players in the internet services space, VSNL has been losing ground steadily. But CEO Srinath Narasimhan, credited with bringing in a professional culture at what was once the only player in this space, has a few tricks up his sleeve.

In the hallowed portals of Bombay House, the headquarters of one of India's largest conglomerates, the Tata group, Srinath Narasimhan is an unlikely CEO. It is hard to spot him wearing a tie, leave alone a business suit. He is not suave. His shirt seems casually worn and he comes across as brusque and snappy. Caps of different colours and sizes adorn a wall in his office, pretty banal compared to the models of planes and expensive cars that find pride of place in offices of other senior Tata executives.
The managers who sit with him in his office in Mahim, a suburb in Mumbai, run scared.In a group that allows a fair bit of freedom for employees, Narasimhan has banned serving food in the floor he works on. Senior managers can get one cup of tea served at their tables, compared to the innumerable cups you can ask liveried attendants to bring you at the corporate head office.
You may ask, what has he got to show for his nonchalance? The company he heads, Videsh Sanchar Nigam Ltd (VSNL, earlier owned by the government of India) has seen its profits dipping in the last few years. Once the market leader in long distance telephony and the sole internet services provider, it is no longer in the reckoning. If anything, in the last six years since the Tatas bought the company from the government and Narasimhan has been a part of the top management, there are more questions than answers about VSNL's long-term survival.
Yet, it is hard to find someone speak poorly of his skills. With his unconventional style, he is credited with having brought in a professional culture at VSNL. He merged the working style of the erstwhile government employees with those that matched the expectation of the Tata group. Later, when VSNL acquired under sea cable company, Tyco, he oversaw the integration of another working style smoothly. Says Narasimhan, "I only defined clearly what I expected out of my executives. The integration seems to be an after effect."

Disconnected past
To be fair to the Tatas, the government dealt a below-the-belt blow that changed the fortunes of VSNL. When the Tatas had bid for the company, they were told by the divestment ministry that they would get to keep their monopoly in carrying international long distance (ILD) to and from India for a period of five years. But, a year after they bought it in 2002, the then telecom minister, Pramod Mahajan, threw open the ILD business and invited other players to build their capabilities. Reliance Infocomm, whose services were inaugurated by prime minister A B Vajpayee and Mahajan, turned out the major beneficiary. A year after the government's order, VSNL's profits plummeted 50% while sales dropped.

Narasimhan had just joined as executive director incharge of operations after a not-so-successful run as the ceo of Tata Internet Services. He was angry of course, but the Tatas were not the kind to take the government to court. Says Narasimhan, "You can't fight if your hands are tied."
Says a close associate of Narasimhan, "To his credit, early on he decided to run the company as if the monopoly did not exisit. In fact, the situation seemed to charge him up."
That was not the only woe. In its internet business, the government decided to have more internet service providers (ISP). This meant that the two state-owned telecom companies, MTNL and BSNL, which carried VSNL's internet services, started offering similar services on their own. With no last mile access to homes of customers, VSNL's retail business collapsed.
So Narasimhan was left with pipes that transported calls from overseas into India and nothing more. VSNL's pipes landed in Mumbai, from where the calls were passed on the networks of other players. VSNL did not even have an STD licence that would allow it to carry its voice and data traffic on its own network to different locations in India. By doing that, it could have collected more toll from local customers.
Narasimhan boils down the situation to an engineering problem with many constraints. "The answer is in the problem. If I could manage a business model that by-passed all the problem areas, I knew we would last it out."
Playing to strengths
Narasimhan knew that the only strength they had when he took over the business was an existing clientele, sundry infrastructure and global relationships that VSNL had created using its state-owned tag. He also had a lot more people than were necessary to run the business. Says he, "It didn't require much management. We were not going to lose our existing avenues of business."
So when Narasimhan started paying a visit to his clients, they were first surprised. Being a monopoly, no one in VSNL had bothered to visit clients. Instead, it was expected that even the biggest buyer of bandwidth paid regular visits to the VSNL office to stay connected. It also gave the old VSNL employees the first flavour of being a customer-focused business.
As the premium vanished out of the bandwidth business, and it became a cheap, replaceable commodity, Narasimhan knew VSNL had to build scale. He bought two companies in the last four years, Tyco and Teleglobe, that together makes the company the fifth largest carrier of voice call. The business today contributes to over 80% of the revenues and is growing, ensuring that VSNL grows in size.
Narasimhan, however, knows after all these years of struggling that if VSNL has to get back to its old glory, he would have to provide exclusive services directly to customers. To do that, he has tied up the group software arm, Tata Consultancy Services, to develop applications that will let corporate customers seeks VSNL's help in managing their IT problem. For example, VSNL will ensure security of network and transactions for companies instead of just leasing out pipes. It will host contact centres for large companies, taking care of all the IT requirements. Narasimhan eventually expects this business to grow to 30% of the revenues from just a tenth today.
To get back their retail customers, VSNL is rolling out wireless services in the top few cities The company is spending close to $500 to roll out wireless services, starting with metros like Bangalore, Mumbai and Delhi. It is also laying its own pipes to carry data in Mumbai to be connected directly to corporate customers. Just like mobile phone companies, it will set up towers for connecting to the internet wireless at far greater speeds than telecom technology can offer today.
Says Narasimhan, "We are not a traditional telecom company. We are a challenger and we have to be different."

End of Article

FOLLOW US ON SOCIAL MEDIA