BSNL losing to private service providers in rural India

State-owned telecom operator BSNL, which was in the forefront for providing telephony services in rural India, is now steadily losing market share to leading private operators in the country.
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p>BSNL took up the mammoth task of providing telephony services to rural dwellers at the time when private operators were shying away as they considered it to be an unviable business option. The company is also credited for starting the PCO revolution in the country.

However, at a time when wireline has taken a backseat with a flourishing wireless subscriber base in rural India, BSNL is witnessing a decline in the growth rate of its wireless subscriber numbers. Though it offers services at very low tariffs, it has not been able to compete with private players.

Comparison of the rural subscriber growth rate in the December 2009 and September 2009 quarters reveals that BSNL's dominance has been slowly eroding in rural and remote parts of the country with private players taking the lead.

In December 2009, BSNL had 22.4 million rural subscribers, as compared to 20.9 million in September 2009, registering a growth of about 7 per cent in that period.

Airtel, which is leading the rural mobile subscriber market, had 43.2 million subscribers in December 2009, as compared to 38.5 million in September that year, a rise of about 13 per cent. Similarly Vodafone, with 30.4 million rural subscribers in December 2009, grew its base by 11 per cent from 27.3 million in September 2009.

BSNL had bagged some of the largest projects for wireless connectivity. In 2008, it was awarded a tender for 93 million GSM lines, worth Rs 35,000 crore, for enabling wireless connectivity in India, mainly in rural areas. But the company scrapped it in March this year, as it was unable to meet capacity requirements for the mega project.

This combined with problems of red-tapism and trade unions, and uncertainties such as disinvestment and (initial public offering) IPO plans, have further added to its worries.

BSNL's chairman and managing director Kuldeep Goyal said in 2007 that the company will be investing Rs 15,000 crore that year, and Rs 20,000 crore each year for the next three years (till 2010), to expand its mobile network and rural reach.

BSNL has done little to promote its GSM network in rural areas, compared to its private rivals.

Airtel offers special prepaid Grameen packs for rural customers. In 2008, it partnered with Nokia to come up with two handsets that would have the menu and SMS facilities in Kannada to achieve deeper penetration in rural Karnataka. Airtel also set up service centres in rural areas of the state. Apart from these initiatives, the telco constantly reinvents its value added service offerings for rural areas.

Vodafone too had launched a slew of offers for its rural customers. It introduced low-cost handsets, besides services such as information, entertainment, mobile payments and money transfers. All this has worked for strengthening its position in these areas.

BSNL's financial health has also been quite unstable in the last few years. In year ending March 2005, the telco's revenue stood at about Rs 36,000 crore, and the next year it registered a rise of about 11 per cent, taking its overall revenue to Rs 40,000 crore. Since then, the company's revenue has been declining year on year. In the year ending 2007, it stood at about Rs 39,000 crore, followed by Rs 38,000 crore in 2008 and Rs 35,000 crore in 2009.