Can BSNL Rescue Price-Sensitive Consumers from the Impact of Recent Data Price Hikes?
Empowering BSNL with the 800 MHz spectrum can provide affordable, high-quality mobile services and protect consumers from rising data prices.
Recently, India witnessed a series of data tariff hikes, sparking significant public discontent. Many feel that affordable data tariffs were initially employed to foster data dependence, and now, with rising tariffs, they find themselves with limited alternatives due to the reduced market competitiveness. This sentiment is particularly strong among the price-sensitive segments of society. However, there is a silver lining: BSNL, the state-owned telecommunications provider, is in the process of rolling out comprehensive 4G services in the 700 MHz band, a project supported by a series of government packages since 2019. This note aims to assess whether these revival packages have genuinely enabled BSNL to better serve the public interest, and if not, to identify the reasons behind the shortcomings despite substantial government support.
BSNL’s Revival Packages: A Comprehensive Overview
Since 2019, the central government has implemented a series of revival packages aimed at strengthening BSNL to enhance consumer services and fulfill its social objectives. These packages are detailed below, categorized by their key components: Spectrum Allocation, AGR Dues, Capital Expenditure (Capex), and Sovereign Guarantee (Reference - BSNL’s Annual Report dated 31st March 2024).
1. Spectrum Allocation
Revival Package 2022: The Union Cabinet approved the allocation of spectrum in the 900/1800 MHz band through equity infusion amounting to ₹23,373.44 crore, covering ₹19,808 crore for spectrum and ₹3,564.44 crore for GST. This included funding for 106 MHz effective from February 29, 2020, and 22 MHz effective from October 27, 2022 with a validity of 20 years license period.
Revival Package 2023: The government approved measures valued at ₹89,047.82 crore for spectrum allocation through equity infusion from FY 2023-24 to 2025-26. This includes:
₹56,298.69 crore for spectrum in the 900 MHz, 700 MHz, 1800 MHz, and 2500 MHz bands for FY 2023-24.
₹26,184.20 crore for the 3300-3700 MHz band in FY 2024-25.
₹6,564.93 crore for the 26 GHz band across FY 2024-25 and 2025-26. Additionally, ₹12,078.43 crore and ₹12,622.66 crore were received for spectrum funding on October 18, 2023, and April 9, 2024, respectively, with a payment of ₹10,253.30 crore made to the DoT for spectrum allotment.
2. AGR Dues
SC Judgement 2020: Following the Supreme Court’s judgement on September 1, 2020, BSNL's AGR dues up to FY 2022 were calculated at ₹22,521 crore. The government infused ₹26,984 crore (₹22,521 crore principal plus ₹4,463 crore GST), and equity shares were issued to the President of India on May 12, 2023.
Additional AGR Dues FY 2023: For FY 2023, additional AGR dues of ₹1,413 crore were calculated. The government infused ₹1,667 crore (inclusive of GST), for which BSNL issued equity shares to the President of India on February 13, 2023. The total AGR funding by the government to BSNL is ₹28,651 crore.
3. Capital Expenditure (Capex)
Revival Package 2019: Included a sovereign guarantee for issuing bonds worth ₹8,500 crore to fund the VRS package for employees aged 50 and above, along with approval for the monetization of BSNL towers and fiber.
Revival Package 2022: Financial support for capex was set at ₹22,471 crore. Additional funds were received during FY 2022-23 and FY 2023-24, totaling ₹16,189 crore for the period up to FY 2021-22 and ₹1,200 crore for each subsequent year. An equity infusion of ₹565.1 crore was received for capex in FY 2023-24.
4. Sovereign Guarantee
Revival Package 2022: A sovereign guarantee was provided for raising long-term bonds worth ₹22,828 crore. Specific amounts raised in late 2022 and early 2024 totaled ₹6,244 crore (₹4,184.7 crore at 7.72% on December 22, 2022; ₹475 crore at 7.55% on March 20, 2024; ₹1,308 crore at 7.51% on March 20, 2024; and ₹276 crore at 7.51% on March 26, 2024). Total Sovereign backed borrowing as of 31th March 2024 stands at Rs 15,773 Cr.
Total Authorized Capital Infusion
Increase in Authorized Capital: The authorized capital of BSNL was increased from ₹1,50,000 crore to ₹2,10,000 crore as part of the Revival Package 2023, ratified in the Annual General Meeting held on September 27, 2023.
The cumulative value of these revival packages, including additional capital infusions, highlights the government's commitment to enhancing BSNL's infrastructure and competitive stance in the telecom sector. The total support provided through these packages amounts to approximately ₹2,10,000 crore.
Have These Packages Improved BSNL’s Ability to Provide Affordable 4G Services?
The critical question is whether the numerous revival packages from the Government of India (GOI) have enabled BSNL to deliver high-quality, affordable 4G and 5G services. In my view, they have not, and here's why.
BSNL's 4G deployment primarily uses the 700 MHz band, where the number of affordable 4G devices is limited for the price-conscious market segment BSNL aims to serve. This segment is most impacted by rising mobile data tariffs. Additionally, BSNL's other spectrum holdings, like the 900 MHz band, are mainly used for 2G services and are not available for 4G deployment in the mid-term. The high-frequency bands like 1800 MHz and 2500 MHz lack sufficient coverage capability and are not suitable for standalone deployment. The 3500 MHz and 26 GHz bands, meant for 5G, also have poor coverage due to low RF propagation characteristics.
To serve price-sensitive consumers effectively, BSNL needs an ecosystem of affordable 4G devices in the 700 MHz band. Unfortunately, this ecosystem is less developed than the 800 MHz band, with no devices (feature phones or smartphones) priced below ₹4,000.
The 800 MHz band has several devices in this price range, catering to price-sensitive consumers. It took time for these devices to become available, and BSNL should leverage this already developed ecosystem instead of trying to reinvent the wheel. It is unfair to expect these price-sensitive customers to buy new devices when they can use their existing ones to switch to BSNL. In the higher price range of ₹4,000 to ₹6,000, the 700 MHz band has only three models compared to seven models in the 800 MHz band.
Given the absence of affordable devices for price-conscious consumers, it is unlikely these consumers will benefit from BSNL’s data packages amidst rising data rates from private sector competitors. Consequently, the revival packages provided to BSNL may not effectively improve the lives of those desperately needing relief from rising data prices.
Can BSNL’s Competitiveness Be Enhanced to Better Serve Consumers?
There is still an opportunity to make BSNL more competitive and empower it to serve consumers better. The GOI can take immediate steps to alter BSNL's technology and band utilization strategy. How? By shifting BSNL's 4G network to the 800 MHz band, which has remained largely unused since the 2022 auction. With 116 MHz of valuable spectrum lying fallow and unused, and no interest from private operators, reallocating this spectrum to BSNL will not harm private players.
This move will enable BSNL to serve low-end customers better, as there is a reasonable selection of affordable 4G devices compatible with the 800 MHz band, especially those under ₹4,000. Devices like the Jio Bharat B1 (₹1,299) and Itel Magic X Pro (₹2,299) are already available and cater to consumers who cannot afford more expensive options.
Regarding the current deployment of equipment in the 700 MHz band, this can be repurposed for 5G. Modern BTS (Base Transceiver Stations) can switch between technologies at minimal incremental costs, and with carrier aggregation capabilities with the 2100 MHz band, BSNL can create a viable, high-quality, affordable 5G network. This strategy would increase data speeds and network efficiency, similar to the approach taken by Dish and T-Mobile in the USA.
The investment required to make this shift would be incremental for BSNL. From a spectrum pricing perspective, reallocating this spectrum to BSNL would not impact the government since the private sector is not interested in the remaining 800 MHz spectrum.
Also, utilizing this spectrum efficiently will make BSNL an effective 4G player and a significant 5G player. This is crucial as the 3500 MHz and 26 GHz bands are not ideal for mobile handsets due to their poor coverage and in-building penetration capabilities.
Implementing this strategy will be a win-win for the government, consumers, and BSNL, ensuring more affordable services and keeping private players in check from insensitively raising prices.
Conclusion
The Indian government has invested substantially in BSNL through a series of revival packages. While some of these investments may be notional, a significant portion involves real capital expenditure and guarantees that impact the central government’s overall debt commitments. If these commitments accumulate significantly, they can affect India’s overall credit ratings. However, not all is lost. There is still a viable path forward to make these investments work effectively.
BSNL can be transitioned to the 800 MHz band, which remains unused and cannot be leveraged by existing mobile operators. This band is primarily a 4G band for RJIO, which has shown no interest in acquiring the remaining spectrum as they focus on expanding their 5G services using the 700 MHz band. Bharti Airtel also has limited interest in this spectrum. Allowing BSNL to utilize this spectrum is the right move and aligns with the interests of both India and its consumers. Additionally, BSNL can leverage the 700 and 2100 MHz bands to create a robust 5G network to serve Indians better, as explained in this note.
The government has already spent significant amounts on BSNL, playing a crucial role in nurturing the mobile broadband ecosystem. It should now reallocate resources to enable BSNL to fully leverage the 800 MHz band. This strategy would help BSNL serve the Indian populace better, especially the poor and underserved segments most affected by data price hikes.
By empowering BSNL with the 800 MHz spectrum, the government can ensure more affordable and high-quality mobile services, maintaining market competitiveness and preventing unreasonable price increases by market leaders. This approach will foster growth and enhance mobile service quality, ultimately benefiting India and its consumers.