The other day, after the 3G bids had closed and the Trai recommended telcos with more than 6.2 MHz of spectrum were asked to pay for this at the same rates as the 3G bids, a suggestion was made that BSNL and MTNL be asked to give up their 3G spectrum. They hadn’t done too much with it for the last one year they had it (as a monopoly at that), so what was the chance they would be able to do much now? Apart from the Rs 5,825 crore and Rs 9,665 crore that MTNL and BSNL have to pay, respectively, for their 3G licence, they also have to pay Rs 3,096 crore and Rs 2,631 crore for the extra 2G spectrum that they have.
Most colleagues reacted with horror, saying this was just an attempt to give the market over to private sector players and to allow them to charge higher prices once the PSUs were out of the market; attempts to organise a debate (every Wednesday in BS, two people arguing opposite sides of a point, 700 words each on the Oped page) on this met pretty much the same fate. Even those who could normally be expected to argue that BSNL and MTNL should give up their 3G spectrum were wary of saying so — when you go to villages, they all argued, it is only BSNL that provides connectivity… .
While the role of the public sector as Bharat’s saviour is appealing, the facts don’t fit the picture. Tucked away in an annexure in the latest Trai recommendations is a table giving the number of villages covered by each telco. BSNL and MTNL have covered a total of 285,495 villages, which is around 48 per cent of the total number of villages in the country. The number for Airtel, hold your breath, is a whopping 334,891, or around 56 per cent of all villages; Reliance has covered 53 per cent and Tata has covered 37 per cent of all villages. (Of course, this doesn’t include landlines where it is BSNL that has set up most of the 10 million rural phones, but that is a historical reality and was funded entirely by taxpayers’ money or by overcharging on long distance calls — today, rural landlines are reducing by around 0.8-1 million a year and the real growth is coming from mobile.)
Sceptics will argue that “covering” a village means little since it just means the village is within the reach of a mobile phone tower, but what really matters is the number of customers each company has. Once you do this, the comparison gets even worse. In December 2008, Bharti had 26.1 million rural subscribers, Vodafone had 19.2 million and BSNL was third with 16.3 million subscribers. A year later, the lead had increased even more — Bharti was up to 43.2 million, Vodafone to 30.3 million, Idea/Spice to the third place with 26 million and BSNL slipped to the fourth position with 22.4 million rural subscribers. That means, apart from covering more villages, the private firms were also getting a lot more customers from each village.
Matters aren’t much better when it comes to spectrum. BSNL and MTNL were, of course, given 3G spectrum free a year ago, after which they were expected to match what the bids threw up. But, apart from this, they were also given more 2G spectrum. For what, is the question that needs to be asked. Another annexure in the Trai recommendations has pretty revealing data on this as well. Take MTNL first. In Delhi, it has 12.8 MHz of spectrum versus Bharti and Vodafone’s 10 each — while MTNL had 20 lakh customers, Bharti had 54 lakh and Vodafone 45 lakh. Bharti’s “call success rate” was 98.89 per cent, Vodafone’s 99.42 per cent and MTNL’s 96.07 per cent. When it comes to the “call drop rate”, this was 1.03 per cent for Bharti, 0.78 per cent for Vodafone and 1.2 per cent for MTNL.
MTNL fares better in Mumbai. It has 23.7 lakh subscribers on its 12 MHz of spectrum as compared to Bharti’s 28.6 lakh on 9.2 MHz, but Vodafone beats it hollow with 47.6 lakh on 10 MHz. The “call success rate” is, as in the case of Delhi, lowest for MTNL and the “call drop rate” the highest.
Matters aren’t very different for BSNL. In Kolkata, it has 16.7 lakh users on 10 MHz of spectrum as compared to 32.2 lakh for Vodafone (9.8 MHz) and 26.9 lakh for Bharti (8 MHz). In Maharashtra, BSNL has 38.4 lakh subscribers (10MHz) as compared to 62.6 lakh for Bharti (8.2 MHz), 58.9 lakh for Vodafone (6.2 MHz) and 82.8 lakh for Idea (9.8 MHz). The “call success rate” is the lowest for BSNL and the “call drop rate” the highest. A similar story gets repeated in most states.
Given that the private sector seems to be delivering a lot more to even rural areas and provides better quality, it makes you wonder who the real “public” sector is. More so since, unlike BSNL and MTNL, the private sector firms aren’t losing money, public money, hand over fist — after a modest profit of Rs 212 crore in 2008-09, MTNL made a loss of Rs 2,515 crore in 2009-10 as its revenues fell around a fifth; in the case of BSNL, despite getting Rs 2,600 crore from the government to subsidise its landline business and another Rs 3,000-odd crore as interest on its bank deposits, the net profit of Rs 575 crore in 2008-09 converted into a loss of Rs 2,611 crore in 2009-10. Perhaps this is something the government would do well to keep in mind when it sits down to decide whether or not to give BSNL and MTNL a waiver from the 3G licence fee, and ditto for the charge for “extra” spectrum holdings beyond 6.2 MHz on grounds that these two firms are performing a public utility.
