Bharat Sanchar Nigam Ltd.: Ruling the Indian Telecommunication Market

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Case Details:

Case Code : BSTR071
Case Length : 15 Pages
Period : 2003
Organization : BSNL
Pub Date : 2003
Teaching Note :Not Available
Countries : India
Industry : Telecommunication

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Losing Customers Contd...

BSNL's problems also increased with new private landline operators expanding their services by entering into many telecom circles.

There was a substantial difference in the deposit money charged by BSNL compared to that charged by private players. BSNL subscribers, especially those who got their connection under the Own Your Telephone (OYT) scheme³ opted to surrender their phones and recover their deposits.

Many of them reportedly switched to private players since the deposits required were in the range of Rs 1000 to Rs 3,000 only.

Given the above developments and considering that BSNL's cellular service (launched in late 2002) was yet to prove itself, the company's chances of retaining its leadership in the Indian telecom market seemed to be rather bleak.

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Background Note

India's telecom industry dates back to 1852, when the British introduced the telegraph service in the country. After the country's independence in 1947, the industry was handled by the Posts and Telegraph Department (P&T).

In 1985, P&T was reorganized into two parts - The Department of Postal Services and The Department of Telecommunications (DoT). DoT worked towards providing basic telephony to Indians and offered services including local and national long-distance telephony (NLD, also called as STD⁴ facility), ISDN,⁵ data networking, satellite and public telephones. In 1986, a part of DoT was corporatized to form Mahanagar Telephone Nigam Ltd (MTNL) and Videsh Sanchar Nigam Ltd. (VSNL). MTNL handled telecom operations in Delhi and Mumbai, the two largest cities in India, while VSNL was responsible for the Overseas Communications Services (OCS). VSNL served as the international telecom service provider in India...

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3] Under this scheme, users had to pay a refundable deposit (Rs 8,000 to Rs 15,000, decided on the basis of the telephone exchange's capacity) if they wished to get a telephone connection. The deposits earned an interest equal to the rate payable by the largest Indian public sector bank, State Bank of India, on fixed deposits for one year. The interest earned was transferred back to the users as deductions in their bimonthly phone bills, for a period of 20 years.

4] Short for 'Subscriber Trunk Dialing', STD enables user to talk to subscribers in another telecom circle.

5] Short for Integrated Services Digital Network. ISDN lines are high-speed digital phone lines, which are much faster than normal phone lines. They can transfer data, voice and graphic images at upto 128 kilobytes per second.