Landlines in the time of 5G: Private sector getting serious about business

The latest data from the Telecom Regulatory Authority of India showed Reliance Jio at 28% market share in wireline subscribers, ahead of BSNL at 27% and Bharti Airtel at 24%

“I have a landline phone that hardly works. Getting it repaired is a task even after making several rounds of calls and visits to their office....’’ This is what an official, who’s worked with the government and the private sector, had to say on the state of landline services offered by state-owned telcos. He pointed out that similar services offered by some private operators rarely break down. His concern is shared by many others.

A bit of history may explain things. While state-owned Mahanagar Telephone Nigam Ltd (MTNL) offers its services in Delhi and Mumbai, the rest of India is served by Bharat Sanchar Nigam Ltd (BSNL), a central public sector undertaking. Both have enjoyed their place in the telecom sector for long years. MTNL got Navratna status (granting it a certain amount of autonomy) in 1997 and was listed on the New York Stock Exchange back in 2001. Subsequently, it delisted the American Depositary Shares (ADSs) from the NYSE.

BSNL was a monopoly of sorts, with instances in the past when it resisted sharing its widespread telecom infrastructure in rural areas with private telcos. Among other privileges, BSNL, along with MTNL, had been allotted 3G spectrum ahead of private telcos outside the long-drawn auction process, prompting a debate on preferential allotment. Rolling out a delayed 4G service only now, BSNL has the privilege of getting 5G spectrum allocated, rather than going through auction as private telcos have done. The telco was also a recipient of a rescue package of around Rs 68,000 crore that included 4G spectrum allocation, a voluntary retirement scheme and asset monetisation.

But despite everything else and even with private sector companies caming in with aggressive competition in mobile telephony and turning it into a debt-strapped telco, BSNL held on to its number one position in landline services. What changed then? Caught in the politics of yes and no of merger of the two entities, besides the bureaucratic hurdles in anything from procuring equipment to upgrading networks, BSNL and MTNL’s fall is not sudden, according to an analyst.   

The market share of both BSNL and MTNL has seen a steep decline as mobile sets quickly replaced the modest landline phones. While the two financially stressed telcos, which have been on the verge of a merger several times, have been losing subscribers, the latest monthly data showed private sector leader Reliance Jio topping the list in the number of landline subscribers, surpassing the fixed-line service stalwart BSNL. Even as the combined landline base of BSNL and MTNL is still higher than Jio’s, a keen contest has begun where there was none. The disruptor in mobile telephony may do a repeat in landline, some suggest.

The latest data from the Telecom Regulatory Authority of India (Trai) showed Reliance Jio at 28 per cent market share in wireline subscribers, ahead of BSNL's 27 per cent and Bharti Airtel's 23 per cent. MTNL, which held on for a long time in Delhi and Mumbai markets, has a 10 per cent all-India market share in wireline.

A comparison of numbers over the last three years shows BSNL and MTNL together at 13.8 million wireline subscribers as of March 31, 2019, moving down to 10.2 million in the corresponding period in 2022. That’s a decline of 26 per cent from 2019 to 2022. While Jio had no landline base in March 2019, it got 6.2 million in the same period this year. From 2020 when it had a base of 1.1 million wireline subscribers, Jio’s growth is at 343 per cent in two years.

Bharti Airtel has grown its landline numbers from 4.3 million subscribers to 5.9 million subscribers, showing an increase of 36 per cent. This is against the backdrop of the overall landline subscriber numbers falling from 37 million in March 2010 to 25 million in March 2022, a drop of 33 per cent in about 12 years.

However, in the past three years, the wireline numbers have risen from 21.7 million in March 2019 to 24.8 million in March 2022, a growth rate of 14 per cent. And in fact, the latest Trai data till August 2022 shows the total wireline number at nearly 26 million, which is higher than the end of 2016 figure of a little over 25 million.

Does the contrarian trend of the last two years or so suggest that the private sector is getting more serious about the landline business than one had imagined? Is it because of the poor quality of voice calls available on mobile phones? “I cannot do without a landline phone at home or in office as it can be a challenge to complete a conversation on mobile phones because of erratic signal and call drops…." That’s a young and savvy professional speaking. She was born after the entry of mobile phones in India some 27 years ago, and she has many backers on the need to have wireline phones.

Prashant Singhal, Emerging Markets Technology, Media & Entertainment and Telecom (TMT) Leader at EY, explained the rising demand for landline phones after years of decline. According to Singhal, it’s not so much for voice calls but for fixed broadband service that people want and service providers are eager to offer landline. There’s a business case for landline along with broadband with an estimated ARPU (average revenue per user) at around Rs 800 to 1,000 per month, analysts believe. With the ARPU for wireless subscribers stuck at below Rs 200, the landline looks like a saviour. Singhal said the landline ARPU has the potential to go up as the fibre-to-home network expands and the time to recover capex comes down drastically. Another advantage in landline-broadband combo service is that the churn rate of subscribers is lower. Subscribers stick around for at least seven to eight years unlike in prepaid mobile service, Singhal pointed out.

Why then are state-owned telcos not cashing in on this trend of wireline-broadband? BSNL Chairman and Managing Director P K Purwar, who holds additional charge as MTNL CMD, was not available for comment. But analysts point out that while these telcos are increasingly using fibre in their networks, the last mile is mostly copper, which is a hurdle in the way of fast broadband service. To upgrade the copper to fibre would mean at least Rs 5,000 crore of investment for a telco like BSNL, an analyst said asking not to be named.