DoT's BSNL Ask of States may Hit Private Telcos
The Department of Telecommunications (DoT) has written to the state governments to consider using the telecom services of state-run operators Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), citing data security needs.
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The Department of Telecommunications (DoT) has written to the state governments to consider using the telecom services of state-run operators Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), citing data security needs.While governments have from time to time mandated using services of state-run telcos on a project-wise basis, such a broad directive of sorts is unprecedented, said industry executives. If implemented, it could cost private telecom and internet service providers (ISPs) thousands of crores in potential annual revenue, they said, adding that the smallest players would be the hardest hit as they survive on wafer-thin margins.Revenue from government contracts constitute a big part of the enterprise revenue of all private telcos and ISPs. The adjusted gross revenue of the telecom industry from April-December 2024 stood at Rs 2,23,799 crore, with private players accounting for more than 92% share.In similar letters, dated April 8, addressed to the chief secretaries of all states and Union Territories, DoT secretary Neeraj Mittal said, 'As BSNL/MNL are becoming competitive in the telecom sector, and in light of the Cabinet decision in the past, I request you to consider utilisation of the services of BSNL and MTNL by all departments/agencies/PSUs (public sector undertakings) of the state government for internet/broadband, landline and leased line requirements.'ET has seen a copy of the letter.Mittal added that BSNL — which now runs MTNL's operations as well — would dedicate a separate one-stop nodal point to provide the highest level of services to the state governments.The DoT's suggestion could lead to the private sector players missing out on lucrative and typically long-term government sector contracts.State governments and PSUs give contracts to private players through a tendering process, and the final bidder is selected based on the lowest price.But the DoT's letter distorts the historic level playing field, according to private players, with the government siding with one particular telco.An industry executive said the idea behind carving out BSNL and MTNL from the DoT as a separate entity was to let the company function independently and to ensure that the government did not act as a regulator as well as the owner.'The government has been supporting BSNL through various financial packages, and it should compete in the market on its strengths and not through preference,' said the executive, who did not wish to be identified.The president of the Internet Service Providers Association of India, Rajesh Chharia, told ET that the government, which is the licensor, should be non-partial towards licensees, whether government or semi-government or PSU or private, for healthy competition among them.'The objective of the government should be the proliferation of broadband and internet rather than promoting any particular service provider. This way other operators will get discouraged and will not come forward for any promotional activity of the country, and people will start questioning patriotism if this partiality is done by the government or department,' he said.But the DoT said the move was approved by the Cabinet in 2019 while approving the revival package for BSNL and MTNL.The letter said 'the Union Cabinet inter-alia had approved the mandatory utilisation of capacities of BSNL and MTNL for internet, landline, and leased line requirements by the Central government, in view of the data security needs.' It further said, 'On similar lines, state governments were also requested to utilise the network capacities of BSNL for their telecom requirements.'So far, the government has invested about Rs 3.22 lakh crore in BSNL and MTNL as part of three revival packages since 2019, including the roll-out of 4G services.As a result of the revival packages, BSNL has sustained revenue increases and for the first time since 2007-08, the company achieved a net profit of Rs 262 crore in the third quarter of 2024-25.'BSNL has accelerated capex investment in the last two years to upgrade its network and telecom infrastructure pan India. A massive investment has been made in transmission equipment and optical fibre cable network,' the letter said. 'The capex is expected to put BSNL on a higher revenue growth trajectory in the future.'
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