Understanding the evolving challenges in the

Indian Telecom Industry: A case study on

BSNL

Prepared By:

Date:

Saurabh Gaur
Shashank Gupta
Sanmay Bhaumik
Sarat M Anand
19th July, 2015

Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

OVERVIEW

The Indian Telecommunications network with 70 million connections is the fifth largest in
the world and the second largest among the emerging economies of Asia. Today, it is the
fastest growing market in the world and represents unique opportunities for international
companies in the stagnant global scenario. The total subscriber base is expected to reach 203
million in 2007. The wireless subscriber base has jumped from 1.6 million in 1999 to 28.2
million in 2003. In the last 3 years, two out of every three new telephone subscribers were
wireless subscribers. Consequently, wireless now accounts for 40% of the total telephone
subscriber base, as compared to only 9.5% in 2000. Wireless subscriber growth is expected
to accelerate further from 2 million new subscribers per month now to 2.5 million by 2005.
Given the persistent low telephone penetration rate of about 7 per one hundred and high
levels of overall economic growth, the telecom sector offers vast potential. The mobile
market recently topped 31 million customers. It is therefore not surprising that India is one
of the fastest growing telecom markets with an average annual growth of about 22% for basic
telephony and over 100% for cellular and Internet services.
Recognizing that the telecom sector is one of the prime movers of economy, the
Government's regulatory and policy initiatives have been directed towards establishing a
world-class telecommunications infrastructure. Capital requirements are considerable. India
requires investments of at least $37 billion by 2005 and $69 billion by 2010.
Even though the sector has reflected promising growth, the teledensity in India still remains
at a very low level compared with international standards and thus there is tremendous
opportunity for future growth. In the medium-term, the industry is expected to continue to
record good subscriber growth as a result of low penetration levels, heightened competition;
a sustained fall in minimum subscription cost and tariff that increase affordability for lowerincome rural users, expansion of coverage area by mobile operators, and government support
through schemes such as the rural infrastructure roll out funded by subsidies from the
Universal Service Obligation (USO) Fund. The Indian telecom sector offers unprecedented
opportunities in various areas, such as rural telephony, 3G, virtual private network, valueadded services, etc. Nonetheless, the lack of telecom infrastructure in rural areas and falling
ARPU of telecom service providers could inhibit the future growth of the industry.

Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

TABLE OF CONTENTS
1

OVERVIEW 2

ISSUES AND CHALLENGES FACED BY THE INDUSTRY

ISSUES FACING BSNL AND POSSIBLE SOLUTIONS 5

PROJECT OVERVIEW

Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

ISSUES AND CHALLENGES FACED BY THE INDUSTRY

Rapidly Falling ARPU(Average Revenue per User)

The competition in the telecom industry in India has led to sustained fall in profits for the
service providers. Intense competitive pressure and cut throat pricing has resulted in
declining ARPUs. With increasing number of new entrants in the telecom space the
competition is likely to continue, putting further downward pressures on the telecom tariffs.
Thus, the telecom companies might have to grapple with further decline in ARPUs, going
forward.
Further, with the telecom companies moving their focus to the rural areas for driving the
future subscriber growth they might not witness a commensurate increase in revenues. In
fact, the risk of steep decline in ARPUs will increase going forward as the telecom
companies penetrate rural markets that are characterised by higher concentration of low
income, low-usage customers. A higher-than-expected decline in ARPU poses a risk of
reduction in margins of service providers. Alternatively, telecom operators are turning their
focus to steadily increasing the minutes of usage (MoU) to counter the sustained fall in
ARPUs.

Lack of Telecom Infrastructure

Lack of telecom infrastructure in semi-rural and rural areas could be one of the major
hindrances in tapping the huge rural potential market, going forward. The service providers
have to incur a huge initial fixed cost to enter rural service areas. Further, as many rural areas
in India lack basic infrastructure such as road and power, developing telecom infrastructure
in these areas involve greater logistical risks and also extend the time taken to roll out
telecom services. The lack of trained personnel in the rural area to operate and maintain the
cellular infrastructure, especially passive infrastructure such as towers, is also seen as a
hurdle for extending telecom services to the under penetrated rural areas.
Rural Areas Continue to Remain Under Penetrated
A rural teledensity of merely 15% point towards the fact that a majority of Indian population
still do not have access to telecom services. The rural India seems to have remained
untouched by the telecom revolution witnessed in the last few years. A huge 'digital divide',
which is reflected by the enormous difference of 74% between the urban and rural
teledensity, reiterates this fact.
However, with the urban markets reaching a saturation point, the telecom service providers
are penetrating rural areas for driving future growth. Thus, the service providers entering new
rural markets might witness substantial increase in subscriber base. The expansion in the
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Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

rural areas, however, has increased the risk of further decline in the ARPUs. Nonetheless the
revenue growth from these regions is unlikely to match the surge in the subscriber base.
Excessive Competition
Another major concern that has come to the forefront in the recent past has been heightened
competitive intensity in the industry that has correspondingly fuelled the price war between
industry players. The Indian wireless market is one of the worlds most competitive markets,
with 12 operators across 23 wireless circles and 6 to 8 competing operators in each circle.
The auction of new 3G licences and the introduction of mobile number portability (MNP) are
likely to heat up competition in the industry, going forward.
Spectrum is the most important resource that is required for providing mobile services. Given
that spectrum is a finite resource, the availability of the same would be inversely proportional
to the number of operators. Thus, larger the number of service providers smaller will be the
amount of spectrum available to each of them.
Scarcity of spectrum leads to higher capex on deployment of mobile networks for the
operators as they need more cell sites to improve service quality. Further the growing usage
of spectrum and the resultant scarcity may lead to re-use of spectrum and increase chances of
congestion in networks leading to constraints on service quality.
Evidently, the competition in the industry is expected to intensify further with the entry of
new players, both domestic as well as foreign players. With the competitive intensity of the
industry already at such high levels new operators might find it difficult to gather significant
share in Indian telecom market. While the new players may benefit from a faster network
rollout through tower sharing, they will face challenges in terms of high subscriber
acquisition costs and lower ARPU customers.
Price War between the Service Providers Putting Pressure on Margins
The ever-increasing competitive intensity in the sector, with licenses and spectrum in several
circles allotted to newer operators, is also a concern and could lead to unrealistic pricing
levels to grab subscribers. The pricing strategy of per second billing already has taken the
price war between telecom operators to the next level. The intensifying price war could put
significant downward pressure on the industry revenue growth. Further, the ongoing price
war and the concomitant decline in telecom traffic could raise the entry barrier for new
companies.
Spectrum Allocation
3G Spectrum availability is one of the major concerns for the industry. Lack of adequate
spectrum which is the most integral part of the mobile telephony sector could hamper its
growth severely. However, the spectrum allotment has been the most controversial issues in
the Indian telecom sector.

Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

The smooth process of scheduled 3G and BWA spectrum allocation is likely to be one of the
key factors affecting the industry dynamics, going forward. Given the highly-competitive
nature of the Indian telecom industry on one hand, and limited licenses in the 3G network on
the other, the risk of excessive biding by the service providers has increased. Irrational
bidding, especially in some circles, might render 3G services financially-unviable. Further,
there exists a risk of delay in allotment of proposed spectrum to the service providers who
have successfully bid for the 3G spectrum.
Regulatory Charges
The regulatory charges in the telecom sector have a complicated structure because multiple
levies impede the smooth implementation of telecom projects in India. Given the
continuously-declining ARPUs, and the extremely-low tariffs, sustianing the current growth
rates of the industry requires urgent attention towards rationalising the convoluted tax
structure in the sector.
TRAI has recommended to the DoT committee to phase out the multiple levies in this sector
with a single levy in a phased manner. Further with regard to license fees, which currently
stand at 6%-10% of total revenue, TRAI has suggested that it be reduced at a uniform rate of
6% across all licences.
MNP (Mobile Number Portability)
The Government has announced that Mobile number portability will be implemented on 1st
November 2010. The industry is expecting a huge churn of subscribers from the weak
operators to major operators who offer better services. There is an opportunity for the new
operators who are looking forward to grab the high end subscribers from the established
operators. This move is bound to be beneficial to the operators who offer congestion free
network and excellent customer service.
Security clearance for procurement of telecom equipment
The Government has not given the clearance for procuring equipments particularly from the
Chinese manufacturers due to security reasons. This has impacted the network roll out in the
country. As per DoT directive prior approval is required before procurement of any telecom
equipment / software. This created a situation where the telecom operators have not been able
to import network equipment since 3rd Dec 2009.
Re verification of mobile subscribers
The Home ministry has issued instructions to all the operators that they should ensure proper
address and identity proof for all their subscribers particularly in the case of prepaid. In a
recent survey conducted in Mumbai by the police it was reported that approximately 60% of
the addresses of prepaid customers are incorrect. The Government feels that there is a major
security threat as in many cases it is observed that the prepaid cards were procured by
terrorists and criminals with fake name and address. To comply with the recent directive, the
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Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

operators have been asked to carry out a re-verification of all their mobile subscribers
incurring huge cost in this process.

Lower Broadband Penetration

The Indian economy remains highly underpenetrated in terms of broadband connections.
High cost of devices (PC and laptop), high internet charges and lower wireline connections
have been some of the major factors inhibiting broadband penetration. Broadband is one of
the key catalysts for economic development and major initiatives by both the government
and service providers are needed to increase its penetration.
Other Growth Inhabiting Factors
While the implementation of mobile number portability is likely to aid improvements in
quality of service, it is also likely to increase the churn out ratio significantly. The service
providers are likely to turn to the VAS as a service differentiator; however, widespread VAS
deployment is restricted due to language and illiteracy.
The deployment of 3G services is likely to help the emergence of new VAS. Mass acceptance
will be crucial for the success of 3G services in India. Comparatively higher cost of handsets
required for accessing 3G services is likely to be one of the major roadblocks in mass 3G
adoption in India.

Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

ISSUES FACING BSNL AND POSSIBLE SOLUTIONS

BSNL has been reporting straight losses consecutively for four years now. Though, loss for
last financial year (2012-13) of Rs. 7884 Cr was lesser than the loss in 2011-12 (Rs. 8851
Cr), it is reported that it would take few more years for BSNL to be profitable again.
While BSNL can get bailouts from Government like any ailing PSU, no amount of bailout
would help in the longer run. A company of BSNLs stature must look to build up revenues
by virtue of its core strengths.

BSNLs Strengths
1. People trust BSNL The first and foremost thing, trust is really important for any
company to gain and retain customers. BSNL is renowned for transparent billing, no
hidden costs and minimal pesky marketing calls.
2. Vast infrastructure PAN India 3G network which is being expanded on aggressive
note
3. Government backing many government schemes like rural broadband network get
rolled out through BSNL. Now this can cause fund crunch if funds dont reach on
time but BSNL must take care to see that such things dont happen!
4. BSNL offices at prime locations in every town and city including metros
These core strengths must be effectively utilized in order to turn profitable.
Following measures can be taken for improving things:

Improve customer care

When people trust a brand and avail their services, it is the brands responsibility to
serve them in an efficient manner. BSNL ironically is currently well known for poor
customer support. Any article from us on BSNL garners at least one negative
comment about the poor support. Being a BSNL customer myself I have
experienced this over the years. Some common experiences are:
1. Long waiting times (even > 15 minutes) to talk to customer care executives and after
an executive is reached the call gets put on hold or even disconnected suddenly
2. Sub par communication skills of call center executives. Even after choosing English
as communication language at IVR, they speak in local language. Quality of English
is poor.
3. Apart from tariff benefits I was never able to get satisfactory answers to queries. Most
of the times I was asked to call after few hours with reasoning of server down.
4. Fake assurances of issue would be solved in 24 hours, and they keep adding 24 hours
thereafter even without registering a complaint reasoning server down! Have
experienced this both in Karnataka and AP. Last experience was some six months ago
in AP.
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Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

Some aspects above have improved, particularly in Karnataka, but the situation
remains largely same in other circles like AP. Having experienced this, I stopped
calling customer care for matters like billing/recharge issues used to take a topdown approach of calling top level officials. Such approaches from multiple
customers would not only hamper the work of top officials but also make the whole
concept of call center useless. To make customers happy:
1. BSNL must improve skill sets of customer care executives lame excuses like server
down are no more acceptable.
2. Provide a website which works for logging complaints. Logged complaints must be
addressed on time with timely updates till then. Read Online Recharge Woes with
BSNL Portal
3. Log on to social media how about centralized twitter and facebook accounts for
PAN India customers with a dedicated team who can escalate issues, call back
customers and solve problems. Private operators do this in a good way. Though they
appear to use bots sometimes, issues get solved within said time often.
4. Provide modern means of support like online chat system. In the age of instant
messaging customers would certainly welcome this.
5. A proper feedback mechanism to rate call center executives. Though an SMS comes
after call, not sure if the responses are looked onto!

Improve marketing
First step towards marketing is having a good looking, up-to-date website. Though
the main website was revamped, circle websites have dated (read 1990s) looks. The
circle specific websites serve little purpose and given the little publicity they receive
little customers know about their existence. The answer lies in the integration of all
websites. BSNL can showcase themselves as one big brand. Merge all websites into
one circle specific, commerce (portal.bsnl.in) and customer care (selfcare portals
currently each zone has one). This is how private operators have it. This integration
will make things easier one team for maintenance, consistent look across sites,
customers can be given unified login benefits.
The social media accounts meant for customer care can be used for brand building.
Web advertisements, newspaper ads, outdoor hoardings are other avenues. Email
marketing can be done, but this must be done very professionally emails must not
be sent everyday for instance. Again design matters here.

Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

Leverage Core Strengths

Employees
Core strength of any organization is its employees. Employees can build or break a
brand. So like every brand BSNL must make efforts to keep employees happy and
also leverage them for building the brand. In order to motivate people to do more, an
overhaul of HR policies like aligning them to modern corporate practices might be
necessary accelerated growth options, attractive perks, recognitions in the form of
awards etc.
Almost everyone is on social media these days. Positive/informative posts from
employees will certainly help BSNL build an identity amongst the net savvy public.
This will also provide a sense of achievement and celebrity status to employees.
Employee unions who are often considered as trouble makers by calling for strikes
can be taken into confidence to talk about the brand. The word of mouth still
remains a powerful medium in attracting people to make a choice. Imagine every
employee bringing one new customer into BSNL family.
Avoid corruption: Linemen who are often contract employees must be trained not to
demand money. While this does not happen everywhere they are still known to
disrupt landline connections if not paid for their services'(!). While it is possible to
bring such issues to notice of higher officials, public generally do not go the extra
mile or sometimes do not know whom to contact.
Infrastructure
One of the core strengths BSNL has is its vast infrastructure telecom towers, fiber
optic network, buildings in prime locations. This infrastructure can be smartly
encashed. Some of these are already being done, but those arrangements can be
increased.
1. Tower sharing agreements with other cellular operators BSNL is in a unique
position here as they probably own a large share of cell towers in rural areas. Though
this may lead to an opinion that BSNL would lose customers that can anyway happen.
Private operators who are generally aggressive will set up towers independently!
2. Routing other network traffic through BSNLs vast fiber optic network
3. Buildings in prime locations can be leased out for commercial purposes. Recently AP
BSNL floated EOI notice for installing ATMs at BSNL office premises.

Revenue Generation
1. Concentrate on Enterprise segment happy enterprise customers can bring in big
revenues. BSNL has necessary capabilities to provide end-to-end enterprise solutions
in the form of attractive tier wise offerings (small, mid, large, very large segments).
Primary enterprise need is dedicated full-time support which any telecom service
provider must provide.
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Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

2. While increasing tariffs is an option, attractive tariffs are the one which makes the
difference this is good for individual customers.
3. Concentrate on improving data network BSNL already has the base ingredient,
lowest data tariffs in industry. With the spurt in smartphones and tablets 3G coverage
is becoming more and more important.
4. Convenience factor for customers:
1. BSNL probably has the lowest density of retailer network this makes it
increasingly difficult to get a top-up/recharge done. On the other hand,
recharges for private operators can be done at almost every corner shop. This
demand supply gap and one poor experience will make a person not to
choose/recommend BSNL. So dealer/franchisee network must be
strengthened.
2. SMS based special benefits activation: While similar benefits are available
across circles in terms of tariffs, SMS/USSD based activation is available only
in handful of circles. Karnataka and Kerala allow almost every STV activation
by SMS while AP and Maharashtra allow minimal. Uniformity all over is
important.
3. PAN India tariff rollouts do not happen on the same day even after
announcement by Corporate office. Circle websites fail to notify
announcements on time. This is where a centralized single website can
benefit.
4. Recently BSNL announced the go green initiative despite of registering for
the facility, I got a print bill this month. Such fails are not desirable.
5. Cell towers can be powered by renewable sources of energy thus reducing
dependency on electricity and hence cutting down power bills.
6. Mounting dues must be brought down this alone can bring in crores to BSNL.
7. Introduce a BSNL Wallet like Airtel money!
8. Shut down loss making telephone exchanges or the ones which bring less revenue
many people opt for landline just due to broadband benefits through such exchanges
(mainly rural). 3G data cards at special prices could be encouraged at such places.
9. Introduce certificate courses for interested at competitive prices. As of now BSNL is
providing internship opportunities to technology students.

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Understanding the evolving challenges in Indian Telecom Industry: A

Case study on BSNL

CONCLUSION

The Indian telecom industry is grappling with many problems. BSNL is no different. Despite
receiving help from Government it is not profitable. There are many factors in favour of
BSNL, for instance it enjoys trust of the customers, it is an old brand, it has a good
infrastructure. However there are many things it can improve to enhance its profitability, for
instance, it should work to make its employees happy so that they contribute towards making
BSNL a better brand. It should also make sure that the density of recharge outlets for BSNL
is increased. If it takes all such steps , its productivity is likely to increase by leaps and
bounds.

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