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Nath Balakrishnan

Private mobile operators have to scramble to address the burgeoning competitive threat of BSNL if they are not to be left behind.

AL Ries and Jack Trout, in their seminal work titled The 22 Immutable Laws of Marketing, propounded the Law of Leadership, according to which it is better to be first in a market than it is to be better. They pose the question, "Who was the first person to undertake the first solo trans-Atlantic flight?" Easy. Charles Lindbergh. But the subsequent question on who was the second person to do so is bound to leave people stumped.

Tweak the above questions to address the Indian cellular telephony market. Who is the largest player in the country? Easy again. Bharti. Who is the second largest player? The answer is more likely to leave people stumped.

It is not Hutch or Idea Cellular, but — surprise, surprise — the second slot is occupied by none other than the state-owned telecom giant Bharat Sanchar Nigam Limited (BSNL). Relatively late entrants into the market it might be, but the additions to their subscriber base is standing testimony to the adage that he who laughs last, laughs the loudest.

Statistics put out by the Cellular Operators Association of India place Bharti at the top of the heap with a subscriber base of about 3 million subscribers. BSNL comes in next with 2.25 million subscribers. If their scorching growth rate is anything to go by, it appears to be only a matter of time before they head the pecking order.

Non-metro focus: And all of BSNL's gains in recent times have come from customer acquisitions made in circles other than the metros, which, arguably, have a greater potential.

MTNL holds the licence to operate cellular services in Bombay and Delhi; BSNL rolled out services in Kolkata last February and commenced operations in Chennai a month ago. So far it is in non-metro circles that BSNL has proved to be an entirely different kettle of fish.

With a network that straddles the length and breadth of the country, it is only appropriate that BSNL's performance be stacked up against that of Bharti, which has operations in 15 circles. To start with, sample some of the numbers available for circles other than the metros.

Take the Maharashtra circle. Bharti commenced operations there in August last year. BSNL did so in October giving the former a two-month headstart. As on March 2003, Bharti had a subscriber base of about 1.2 lakh customers, while BSNL had about 2.75 lakh customers in its fold.

Interestingly, in the period since BSNL rolled out its services, BPL Mobile and Idea Cellular, the other two operators in the circle, have together added just 15,000 subscribers. This clearly indicates that BSNL has grabbeda substantial chunk of new customers entering the market for mobile telephony services.

Cut to Tamil Nadu (excluding Chennai region) and a clearer picture of BSNL's aggressive market entry emerges. Both Bharti and BSNL entered the market last July. As on March 2003, BSNL boasted of a client base of about 1.6 lakh customers, even as Bharti's stood at close to 64,000. The additions to the subscriber base in March this year are particularly interesting. BSNL added 58,000 customers to its client base; Bharti's customer base shrank by about 13,000 in the same period.

Factors behind success: What could be the possible reasons for the staggering success of BSNL's service? A combination of factors is at play.

The positioning of services at aggressive price points has served to attract a larger number of customers. The fact that customers have opted for BSNL's service, in spite of it not being part of the consortium that offered long distance calls at a flat rate of Rs 2.99 per minute is, indeed, noteworthy.

The waiver of deposits for its existing landline customers has also provided an incentive for customers to avail of mobile services, as it dramatically lowers entry costs.

The strength of BSNL's nationwide network has also played a pivotal role in customer accretion.

By pursuing a strategy of penetrating the rural hinterland, a market that has not been addressed by the other players, BSNL has racked up a huge number of customers by focussing on a largely untapped market.

Looking ahead: Going forward, what will it take for BSNL to sustain the momentum it has gathered till date? For starters, the quality of customers that it services will have a greater import than the sheer number.

Having been one of the later entrants into the market, BSNL could have snagged customers who might have been classified as unremunerative by other players in a circle.

However, if such customers avail of the BSNL's pre-paid service, it would more than offset the risk associated with their credit-worthiness as the payment is collected up front.

It is also not uncommon for marketing glitches, such as the shortage of SIM cards, to crop up, as has been the case earlier. At a time when availability of the service is as important as accessibility and affordability, it is imperative that such flaws get ironed out.

BSNL has shown that it need not be hamstrung by the bureaucracy one normally associates with a state-owned outfit, and can give private operators more than a decent run for their money.

Calling the shots as BSNL is now, the onus is now on the private operators to address this burgeoning competitive threat head on. If they do not get their act together quickly, it is only a matter of time before BSNL rings their number.

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