Why Is Mukesh Ambani Batting For A Stronger BSNL?

The official launch of 5G services on Oct. 1 happened with much aplomb and fanfare at the India Mobile Congress 2022, New Delhi. The star-studded lineup of keynote speakers at the event including PM Modi, Mukesh Ambani, Sunil Mittal and Kumar Mangalam Birla, had much to say about the promise of 5G during the launch.

While all of the telecom leaders made strong agreeable statements on the road ahead with 5G services, RIL Chairman Mukesh Ambani pointedly congratulated the government of India and Telecom Minister Ashwini Vaishnaw on continually working to support and revive the languishing state-owned telco Bharat Sanchar Nigam Limited (BSNL).

“A strong BSNL will bring a balancing presence of a government entity in this very strategic (telecom) sector”, he said.

The statement came as a surprise to many but the congregation at the 5G launch seemed more like a bonhomie for all the Indian telecom industry stalwarts who had descended at the IMC 2022 to turn a new chapter in the sector’s history. Even Bharti Enterprises’ Chairman Sunil Mittal was heard lauding Jio’s push with 4G – which started the race to deliver the best 4G services amongst the telcos in the country a few years back.

But why did Mukesh Ambani emphasise the importance of BSNL? Once a telecom powerhouse, the public sector company has been on the decline for many years now.

The telco’s wireless subscriber base share in the Indian telecom sector today stands at 9.72 per cent as opposed to Jio’s 36 per cent, Airtel’s 31 per cent and Vodafone Idea’s (Vi) 22 per cent, according to TRAI data for June 2022.

Credit: TRAI

While other players have built up their subscriber base over the years, BSNL facing mounting challenges has largely lost subscribers. Back in June 2011, when telecom was still a level playing field, BSNL commanded 11 per cent of the wireless scene and Reliance was gaining at 16 per cent. Meanwhile, Vodafone (16 per cent) and Idea (11 per cent) were separate entities.

In Picture: Subscriber bases in June 2011 | Credit: TRAI

In 2022, Indian mobile users hardly factor in BSNL for its service. But despite being reduced to a mere footnote in the current telecom space, the once-dominant entity might have an important role to play.

For Greater Parity

With 5G coming to the fore, the battle between Jio and Airtel is expected to only heat up. While Airtel became the first telco to launch 5G services in the country, Jio has now announced a Beta trial of its 5G services in Mumbai, Varanasi, Kolkata and Delhi. This kind of initiative by the two largest telecom players in the country will only add to their subscriber bases as people are expected to gravitate towards 5G in the next two years.

The Indian telecom market even before 5G’s arrival has been a large duopoly between Jio and Airtel in the past many years - with Vi being a distant third. In such a scenario, a stronger BSNL could theoretically be a good idea as it would bring about a balance to the incumbent duopoly in the telecom sector. This was perhaps what even Mukesh Ambani was hinting at by gunning for a more robust BSNL.

Besides, a stronger BSNL could also act as a barrier for the private players from raising their tariffs while ensuring that the people in rural areas have internet access.

Fixing The Loss Making Machine

Over the past five years, BSNL has piled on Rs 50,631 crore in losses by being a slow mover in the telecom sector that is seeing rapid innovation. Hence, the public sector company is simply unable to keep up.

But there are some positives to BSNL too. In 2020-21, BSNL turned EBITDA positive and its losses have dipped in 2020-21 to Rs 7,441 crore, down from Rs 15,500 crore in 2019-20. The company expects to bring in revenues of over Rs 17,000 crore in FY22.

The Centre has also announced a massive Rs 1.64 lakh crore package for the revival of the state-owned telco with a majority of it going for BSNL to offer 4G services. The funding would also help destress BSNL’s balance sheet and help its fibre network.

The earlier Rs 70,000 crore bailout package by the government in 2019 helped BSNL reduce employee benefits expenses and losses. But the company’s revenues over the years have been largely flat.

The only solution for BSNL’s woes would be to find a way to affect an uptick in its subscriber base. Would this happen by reaching out to rural areas beyond the grasp of private players more efficiently? Only time will tell. Private players are also going to continually work to increase their subscriber bases in both rural and urban settings. No one is expected to give an inch in the telco wars ahead.