BSNL: Empire Strikes Back

On Makar Sankranti (the new year according to Hindu calendar), subscribers in
the country will pay Rs 9 per minute for a peak-time fixed line call from Mumbai
to Delhi which is presently costing Rs 24 per minute, a net saving of around
62.5 percent. With this announcement, BSNL– the incumbent operator has given a
fitting reply to Bharti Telesonic’s 18 December announcement of cutting
cellular to cellular STD rates by 50 percent. BSNL also has the advantage, as it
is implementing the new tariffs on 14 January, twelve days before Bharti
Telesonic’s implementation which is due on 26 January 2002.

BSNL’s announcement is also a welcome sign as the tariff has been
simplified in to two time slabs (peak and off peak) from existing slab of five
and even the distance slab has been reduced from five to three. The simplified
structure will make it easy for consumers to call after a particular time. The
peak time is from 9 am to 8 pm and off peak is from 8 pm to 9 am whereas
distance slab is 50-200 km, 200-500 km, and more than 500 km.

Although Bharti Telesonic’s cut in STD tariff is restricted to cellular
subscribers, in the case of BSNL there is no discrimination and it is applicable
for both fixed line as well as cellular subscribers in the country. BSNL’s cut
will help in benefiting around 4 crore fixed line operators and also 50 lakh
cellphone subscribers in the country.

Announcing the new tariff, minister for telecom, IT and parliamentary affairs
said, "BSNL has decided not only to join the price war but win it
decisively."

The 60 percent cut in STD tariff will cost BSNL around Rs 3,000 crore in the
next six months but with STD market expected to grow by 60 percent in the next
six months one might see an increase in the size of market which is presently
pegged at Rs 7,000 crore. So, in the long run, BSNL’s revenue will not be
affected.

Bharti’s MoU with cellular operators states that in case another national
long distance service provider offers competitive rates, the service provider
will not enter into any discussion with the NLDO unless the rates being offered
by them are at least 5 percent lower than that offered by Bharti Telesonic. In
the present circumstances the rates are lower by 33.33 percent for calls which
are national in nature and even the regional calls are cheaper by 20 percent.

So, the existing MoU has no meaning in the present circumstances and we might
see cellular operators making an about turn and sticking to BSNL rather than
switching to Bharti Telesonic or we might very soon see a restructured tariff
from Bharti Telesonic for cellular operators . The only advantage that works in
favor of Bharti is the revenue sharing agreement which works out to be 33:66 (33
percent for cellular operators) whereas in case of BSNL it is 5:95 (5 percent
for cellular operators ). But in this case Bharti has to get a nod from TRAI.
But whatever be the final outcome it will be the end-consumer who will benefit
from the whole exercise and can make call long distance at cheaper rates.

Pravin Prashant