DoT Recommends States Prioritise BSNL, MTNL for Telecom Services Over Data Security Concerns

According to a news report, the Department of Telecommunications (DoT) has requested state governments and Union Territories to prioritise services from state-run telecom firms BSNL and MTNL. This step, citing national data security, has raised questions in the private telecom industry over market competition and policy neutrality.

DoT’s Advisory to State Governments

In letters sent on 8 April to chief secretaries of all states and Union Territories, the DoT advised that government departments and public sector undertakings use Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) for their internet, broadband, landline, and leased line requirements.

Referring to a Union Cabinet decision from 2019, the advisory noted that BSNL is now managing MTNL operations and will provide a dedicated nodal officer to ensure service quality. The DoT’s communication highlights the strategic and security benefits of using state-owned providers for government telecommunications infrastructure.

Market Impact and Industry Reaction

The directive has prompted concern among private telecom operators. A report stated that such a blanket advisory, if implemented at scale, may distort competition and favour public sector undertakings over private players.

Private telecom companies currently contribute over 92% of the industry’s adjusted gross revenue, which amounted to ₹2.23 lakh crore between April and December 2024. A significant portion of their enterprise business depends on government contracts, which are typically awarded through a competitive bidding process.

Executives from the sector suggest the new directive bypasses this process, potentially reducing their revenue by several thousand crores annually. Smaller internet service providers (ISPs), already operating on thin margins, may be the most affected by such a policy shift.

Concerns over Regulatory Neutrality

The Internet Service Providers Association of India (ISPAI) has voiced concerns over the lack of regulatory impartiality. Rajesh Chharia, President of ISPAI, stressed that the government must act as a neutral licensor. He warned that promoting specific service providers may discourage investment and innovation among others and create negative perceptions among the public.

Industry representatives have also pointed out the contradiction in the government’s position, stating that BSNL and MTNL were separated from DoT to function independently. They argue that providing state-run companies with preferential treatment undermines this objective and could damage the perception of fair market practices.

DoT’s Position and Revival Measures

In defence of the move, the DoT has stated that the advisory is consistent with the government’s revival roadmap for BSNL and MTNL. Since 2019, the central government has allocated ₹3.22 lakh crore in financial packages for the two companies. These packages have supported 4G network rollout, infrastructure upgrades, and operational improvements.

BSNL reported a net profit of ₹262 crore in Q3FY25, marking its first quarterly profit since FY08. The DoT also noted that BSNL’s increased capital expenditure over the past two years has strengthened its optical fibre and transmission network, improving service capabilities for government clients.

Read More: Hindustan Zinc Share Price Rises 2.51% on June 10 Ahead of Interim Dividend Decision! 

Mahanagar Telephone Nigam Share Price Performance

On June 10, 2025, Mahanagar Telephone Nigam share price opened at ₹49.70 on NSE, above the previous close of ₹49.53. During the day, it surged to ₹52.29 and dipped to ₹49.61. The stock is trading at ₹50.70 as of 11:16 AM. The stock registered a significant gain of 2.36%.

Conclusion

The DoT’s recommendation to state governments to prefer BSNL and MTNL for telecom services has triggered a wave of responses across the telecom sector. While the government frames it as a data security and strategic infrastructure measure, industry voices caution that it may challenge fair competition and regulatory neutrality. As state responses unfold, the development adds a new dimension to India’s evolving telecom policy environment.

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