Customer shift to BSNL from private telcos slowing down amid network quality concerns: Analysts

Telecom

The influx of mobile subscribers to BSNL, which occurred after its private competitors raised their tariffs in July, appears to have slowed down. Analysts have noted that ongoing network quality issues are causing some customers to rethink their switch and even return to Reliance Jio or Bharti Airtel.

Bharat Sanchar Nigam Ltd (BSNL) offers considerably cheaper plans than its competitors. For instance, BSNL’s Rs 199 plan offers 2GB data per day for 28 days, at a 43 percent discount from Jio’s Rs 349 plan and at a 47 percent  discount from Airtel’s Rs 379 plan for 30 days. Despite this price advantage, network performance issues are deterring long-term customer retention with the state-run telecom operator.

“We gathered that customer churn to BSNL, observed after the July tariff hikes by the top three private telcos, has significantly slowed down. Some retailers reported port-outs from BSNL back to Jio and Airtel due to its poor network quality,” IIFL Securities stated in a note following a survey conducted across villages and small towns.

The survey conducted by IIFL highlighted that Jio and Airtel offer the best network quality, with Vodafone Idea (Vi) ranked third, while BSNL lagged far behind. Retailers noted that customers shifting to BSNL were primarily from lower-income segments and in rural areas, but this trend has now weakened.

BSNL is rolling out its indigenously developed 4G network. As of October 2024, the company had installed 50,708 4G sites, with 41,957 sites operational. Its rollout, however, pales in comparison to Jio and Airtel, both of which completed their pan-India 5G deployments in 2024. Vi is also preparing to launch its 5G services while expanding its 4G network in 17 priority circles.

Private telcos raised the headline tariffs by 11-25 percent to sustain investments in 5G and boost average revenue per user (ARPU). BSNL, in contrast, did not raise the charges and reportedly has no plans to do so.

All three private telcos suffered major losses for the third month in September due to SIM consolidation trends and customer churn. Jio's wireless user base declined to 463.78 million from 471.74 million in August. Similarly, Airtel’s user base was down to 383.48 million from 384.91 million, and Vodafone Idea’s user count eroded to 212.45 million from 214 million in August, as per subscriber data for September released by the Telecom Regulatory Authority of India (Trai).

BSNL’s wireless base, in comparison, climbed to 91.89 million from 91.04 million in August.

During their recent Q2 earnings calls, top telecom executives highlighted a reversal in BSNL's customer addition trend. They expressed optimism that the full impact of the July tariff hikes would become evident in the coming quarters.

Bharti Airtel Managing Director Gopal Vittal noted that the SIM consolidation caused by the tariff hikes was milder than in previous instances. "As we've seen in the past, these trends normalised over two quarters, and we've already seen normalisation happen. Through October, we’re witnessing a reversal trend with customer additions," he said in the Q2 call.

Vodafone Idea (Vi) CEO Akshaya Moondra echoed similar sentiments, stating that BSNL’s initial impact on the market has begun to wane. “The impact of BSNL has been felt this quarter, but we’ve seen it reversing quite quickly.”

Reliance Jio, too, projected that the full benefits of the tariff hike would materialise over the next two to three quarters.

Despite BSNL’s growth, analysts remain cautious about its long-term impact. In a note, Jefferies remarked that BSNL’s lower tariffs might attract some users but are unlikely to pose a significant risk to Jio and Airtel’s market share in the medium term.

BSNL’s network rollout delays and subpar performance continue to be pain points. Analysts from IIFL suggested that while some rural customers might opt for BSNL after their current plan validity ends, its inability to match the network quality of private players remains a barrier.

Additionally, analysts expressed concerns over rural consumers' ability to absorb future tariff hikes by private operators as it could lower their spending on other items and impact rural consumption. “Most rural and lower-income segment users stated that the Rs 299 plan for 28 days is too expensive. Another round of tariff hike may reduce their spending on other items, impacting rural consumption,” IIFL warned.