New Delhi: Public sector telecom services provider BSNL has been unable to hold its ground against the private operators Reliance Jio, Bharti Airtel and Vodafone Idea despite the Centre pumping in over Rs 3 lakh crore into the telco since 2019 in the form of three revival packages.
In July this year, after witnessing a drop in its subscriber base for 27 months, BSNL made a surprising turnaround, gaining 2.9 million new customers. However, this was mainly on account of the three private operators losing subscribers following tariff hikes. The trend is unlikely to hold for long and experts believe that the “network performance of BSNL is likely to disappoint”.
This isn’t the first time BSNL has got a lead over the three private operators in net subscriber addition. In 2021, there was a similar opportunity that the company failed to leverage. For 4 months between December 2021 to March 2022, the telecom operator witnessed net subscriber additions after the three private operators increased their tariffs. However, BSNL was unable to sustain the momentum and its subscriber base has dipped since then.
A key reason for the telco’s performance has been a lack of 4G services—a feat that rival private operators achieved nearly a decade ago. In addition to BSNL’s own poor financial health, the government’s push for Atmanirbhar Bharat (self-reliant India) has likely exacerbated its woes because the policy restricts BSNL from using 4G or 5G equipment from global vendors. The development, testing, and deployment of new indigenous technology has further delayed BSNL’s 4G and 5G launch.
BSNL will soon be deploying 4G services using a locally developed technology stack provided by a consortium that is led by Tata Consultancy Services and includes Tejas Networks and C-DoT, which bagged an order worth Rs 15,000 crore from BSNL in 2023, to install 4G telecom sites across the country. However, as of August, BSNL had set up only about 10,000 active Base Transceiver Station (BTS) towers, half of what the company had envisaged before launching its 4G network pan-India.
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What BSNL does, others follow
Given the delays in the company’s 4G launch, the Rashtriya Swayamsevak Sangh (RSS)-linked Bharatiya Mazdoor Sangh (BMS), which most BSNL employee unions are part of, had written a letter to Prime Minister Narendra Modi seeking a relaxation in the Atmanirbhar norms so that the company can launch 4G and 5G services by upgrading the current infrastructure using whatever hardware is available until “swadeshi” technology is developed.
In a letter, dated 10 June and accessed by ThePrint, the BMS said that BSNL has not been able to upgrade its network to 4G or 5G because of the constraints of the policy.
“Though we do understand the significance of Atmanirbhar Bharat in telecom and firmly support the idea but [sic] at the same time, we consider it paramount to allow BSNL to launch the services by allowing it to upgrade its existing infra till the time swadeshi technology is developed,” the letter said, adding that the presence of BSNL as a full-fledged 4G and 5G telecom player is a must, not only in the interest of the nation and BSNL but also for the people.
“As a result of not having access to 4G and 5G services, BSNL customers are not being able to use high-speed data services, which is leading to massive churn in its subscriber base, which is adversely affecting the financial health of the company, its employees and also [the] general public, who are being denied access to cheaper data service,” it said.
The BMS urged the government to take “immediate steps” to ensure that BSNL can launch its 4G services and subsequently upgrade to 5G soon. “We are confident that with the right support, BSNL can play a crucial role in providing affordable and accessible telecom services to the people of India,” it added.
BMS also highlighted that BSNL has always acted as a market balancer, keeping in check the tendency of the private telcos to increase tariffs. It noted that when BSNL launched its nationwide CellOne service, all telcos were forced to reduce mobile tariffs. Similarly, all telcos were forced to follow suit when BSNL made incoming calls free in 2013 and all-India roaming free in 2015.
“Hence, the crucial presence of BSNL and its service in the sector is a must to check the monopolistic pricing by private telecom operators,” it said.
A slow, inexorable decline with brief revivals
The operator has been gradually surrendering market share to rivals.
In December 2019, BSNL’s wireless subscriber base stood at over 11.80 crore (10.26 percent market share) and in the wireline segment it was the market leader with a subscriber base of over 95 lakhs (45.61 percent market share). The PSU’s market share in both segments has declined since then. At the end of December 2023, despite three revival packages, the company’s wireless market share fell to 7.94 percent.
It saw a steeper decline in the wireline segment, where it fell to the third spot with 19.28 percent market share. A year later, at the end of December 2020, while the company’s wireless market share remained flat, its wireline subscriber base fell to 35.75 percebt.
According to the latest data released by the Telecom Regulatory Authority of India (TRAI), total wireless subscribers decreased from 1,170.53 million in June 2024 to 1,169.61 million in July. This fall in the industry’s overall subscriber base of about 0.9 million is the first decline since April 2023.
In the first week of July, the three private telecom services providers had announced an increase in their tariffs in the range of 15-17 percent on average. This primarily led to a fall in the number of wireless subscribers due to SIM consolidation in the lower ARPU (average revenue per user) segment. While BSNL—the only operator that did not raise tariffs at the beginning of July—gained 2.9 million subscribers, Bharti Airtel lost 1.69 million subscribers, Reliance Jio lost 0.75 million subscribers, and Vodafone Idea lost 1.41 million subscribers.
In a research note, ICICI Securities said that BSNL had benefited from lower tariffs. It also pointed out that previously, when the telecom tariffs were increased in 2021, a similar trend was seen when BSNL witnessed net subscriber addition between December 2021 to March 2022. Since then, its subscriber base has dipped for 27 months. “Key to watch out is sustainability of subs growth for BSNL/MTNL,” it added.
Likewise, UBS noted that all three major operators lost about 3.9 million subscribers in total in June, with around 70 percent of them moving to BSNL and the rest disconnecting.
Interestingly, Bharti lost more subscribers than Vodafone Idea—which has been finding it difficult to retain subscribers for some time now. UBS added that despite losing the highest number of overall subscribers, Bharti Airtel added 2.6 million wireless broadband subscribers, indicating that most of its churn was in the low-ARPU 2G segment that is most sensitive to a price hike.
“Overall, we see marginal churn across telcos, with BSNL gaining share…In our view, some of this is likely to reverse, as the network performance of BSNL is likely to disappoint,” UBS said. “We will keep an eye on trends in [the] subsequent two months as well, as some churn and market share shifts are also likely to spill over into August and September.”
Not likely to hold on to its recent advantage
In August, responding to an analyst’s query on the tariff hike during the post-result call, Akshaya Moondra, CEO of Vodafone Idea Ltd, had said the firm was seeing a trend where subscribers porting their numbers to BSNL had increased from the pre-tariff increase levels.
“And the reason for that is, of course, that they have not increased their tariffs, so there’s a fair amount of arbitrage. Our expectation is that customers who are used to using a good coverage and experience of 4G, probably the current offering of BSNL may not be to that extent and people who may have taken a quick decision in terms of the tariffs…may most likely come back,” he said.
Jefferies equity research also noted that while BSNL has made market share gains among both voice and data subscribers due to lower tariffs, it was unlikely to pose material risks given limited network investments. The research firm expects Bharti Airtel and Reliance Jio to gain market share in the near term.
The data also showed that total mobile number portability (MNP) requests also spiked during July at 13.68 million requests, representing 1.3 percent of the total active subscribers. The number of MNP requests stood at 11.84 million in June; 12 million in May; 11.07 million in April; 11.44 million in March; and 11.54 million in February.
Jefferies added that the telecom sector’s MNP requests jumped to nearly 14 million in July, the highest level since March 2018 “possibly as users shifted to BSNL/MTNL to gain from the tariff differential”.
A crucial decision for the government
According to the government, the relief packages it has announced have helped the operator. In a written reply to the Lok Sabha, Minister of State for Communications Pemmasani Chandra Sekhar in July said that as a result of these revival packages, BSNL/MTNL have started earning operating profits from the Financial Year (FY) 2020-21.
According to data shared with Parliament, in 2019-20, BSNL had a net loss of Rs 15,500 crore and an EBITDA loss of Rs 6,879 crore. In 2023-24, the net loss narrowed to Rs 5,371 crore, while EBITDA profit stood at Rs 2,164 crore. EBITDA stands for earnings before interest, taxes, depreciation and amortisation
Mahesh Uppal, head of advisory firm Com First India, told ThePrint that with BSNL, the government needs to be clear about the objectives. “Two distinct objectives exist for BSNL, a government company. One is strategic: to have a government player in the sensitive communications industry and to see BSNL as the last-resort operator. The other is that it should be able to compete effectively with other telcos in the same market and offer similar services.”
If BSNL is expected to serve a strategic objective, one could justify subjecting it to stricter control over the equipment it buys, the people it hires, the services it offers, and the locations it serves or doesn’t. In such a case, BSNL’s profitability would be a secondary issue, he added.
“However, if the government wants BSNL to be commercially successful, it needs to get out of the way and give BSNL autonomy in hiring and firing, choosing technology, setting prices etc. Currently, the problem is government control and interference and the delays that come with it. We should learn the lessons implicit in BSNL starting its 4G services eight years later than its competitors,” he said.
(Edited by Sanya Mathur)