Indian telecom sector has witnessed phenomenal growth since 1995. It is poised for further exponential growth in the current decade if the National Telecom Policy – 1999 target of 15 percent telecom service penetration by 2010 is to be achieved from the current level of 4.3 percent. It is estimated to require massive investments to the tune of $ 72 billion by 2010. Clearly, this, national objective can be achieved by a meaningful and complementary participation of both the public and private sector tele companies.  Since this objective also includes providing telecom access and services to every nook and corner of the country including Village Public Telephones (VPTs), both BSNL and MTNL have a bigger role to play in meeting this objective given their infrastructure, resources and reach and the fact that together they account for about 90 percent of the total telephone connections in the country.   Therefore, it may not be prudent to disinvest or privatize these PSEs, at least till India is able to reach global tele-density levels.

The total telephone connections as of now are over 3.5 crore.  Besides, widening the telecom net across the country, opening up of this crucial infrastructure sector has seen high pitched competition leading to freebies, discounts and lowering of tariffs to unexpected levels.  In other words, this sector has justified the proverbial saying that liberalization and competition bring large benefits to customers.

The Tenth Five Year Plan has an ambitious tele-density target of 11.5.  India’s tele-density has increased to 4.29 in 2001-02 from 1.56 in 1996-97.  But, most of this increase is restricted to urban areas – 12.95 in 2001-02 from 4.80 in 1996-97.  In rural areas, the tele-density has increased only marginally to 1.09 during the same period.  Though providing VPTs was part of the licensing agreement, almost all the private basic telecom operators have failed to fulfill their rural telephony obligations except very few villages covered by the six private operators, which were given licenses more than two years back.  Government, several times hinted at hard measures including cancellation of licenses and imposition of huge penalties for not setting up stipulated number of VPTs, but till date no decision has been taken.  Finally, the government is seriously considering giving this responsibility to the state owned companies of BSNL and MTNL for which the private companies would compensate to the tune of capital expenditure. 

Since rural obligation is an unprofitable venture, the private operators do not want to block their investments and therefore may agree to conditions proposed by the Department of Telecommunications (DoT) including reimbursement of cost and part compensation of maintenance.  It is found befitting of these telecom mammoths to fulfill India’s dream of reaching telephones to all its citizens and thus support its drive of overall socio-economic development.

Apart from basic telecom services, the two state-owned corporations have also played a crucial role in making the mobile telephony an “affordable” service.  It can be recalled that private operators had started offering cellular services costing as high Rs.16.80 a minute for a call which has now come down to as low as Re. one for an incoming call and rental almost on par with basic telecom services.  This is thanks to hotting up of competition from these PSUs.  First round of competition started with the entry of MTNL when the private cellular operators, taking note of former’s capacity to charge lower tariffs on account of lower operating costs, were forced to reduce their rates by more than 60 per cent.  Now with the entry of BSNL launching its mobile service across the nation in different phases, the private telecom companies are working out aggressively strategies to meet the increasing competition.

The point to be highlighted is that the cost per line of providing mobile services has come down considerably and it is only the state owned corporations who have passed on the benefit to consumers.  The private operators, on the other hand, have not been able to share the benefit to increase in subscription, may be, due to higher cost for setting up new infrastructure.

It is to be noted that the telecommunications network of the public sector, BSNL and MTNL, is one of the largest telecom network in Asia.  It has a capacity of over 4.3 crore lines and over 3.5 crore working connections.  Not only this, both the companies are continuously updating their capacities and investing in new technologies in order to provide more and more value added services at a reasonable cost to their customers.

Recently, the Government has proposed to merge the two state owned corporations and details are being worked.  If the proposal gets materialized, the merged entity would become a bigger Public Sector Undertaking (PSU), with huge resources at its disposal.  The market has not welcomed the proposal as the share prices of MTNL have tumbled down to below Rs.100 from about Rs.130 per share before the proposal was mooted.  But as rightly pointed out by the Communication Minister Mr. Pramod Mahajan that division between MTNL and BSNL is just geographical and not practical, the combined entity would become a force to be reckoned with and will pose a great challenge to the private operators resulting in greater benefits to the customers.

The issue of merger or disinvestments remains as contentious as ever.  But, undoubtedly, existence of public sector telecom companies has greatly helped in revolutionizing India’s communication infrastructure.  As communication is one of the most crucial infrastructure requirements for taking economic growth to higher level, both BSNL and MTNL have aptly fulfilled the objective with which PSEs were set up, namely to assist in making the country economically and socially stronger and serve even those areas which private sector may not consider given its revenue motive.

A decade of reforms has seen India successfully breaking away from the Hindu rate of economic growth and reaches a higher growth rate of about 6 percent.  But, we are till way behind the growth rate achieved by other Asian countries or specifically that of China.  To match their growth rate, we will have to further accelerate our communication growth.  And this can effectively be done with the help of both the public and private telecom companies.  At this crucial juncture when India needs a decisive push to reach a higher sustained growth of 7 percent plus, BSNL and MTNL have a larger role cut out for them.  Though it is difficult to argue against disinvesting profit-making enterprises like BSNL and MTNL to realize higher value as compared to the loss making ones.  But, perhaps it makes greater economic sense to continue with their present status as PSEs in the national interest and not to privatize or disinvest at least for some more time in order to make a higher sustained economic growth a reality.