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Public Sector Telcos Should Not Be Sidelined

The National Digital Communications Policy 2018, has little to say on their larger strategic and social importance.

The recently released National Digital Communications Policy (NDCP) 2018 by the Department of Telecommunications recognises some of the major elements of digital economy such as improved broadband penetration, better radio spectrum management, augmented security of national telecom infrastructure, adherence to Net Neutrality principles amongst others.

However, one important piece that is missing is the role of State Owned Enterprises (SOEs) such as Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL).

Though in most countries the governments have given up their hold on telecom infrastructure and let in private enterprises, China remains an exception. China surpassed one billion in 4G LTE subscriber base at the end of last year, with SOEs — China Mobile, China Telecom and China Unicom — accounting for about 65 per cent, 18 per cent and 17 per cent of the subscribers respectively. Thus China accounts for more than 40 per cent of 4G subscriber base in the world.

What is important is that in a digital economy, Chinese telecom firms are supposed to simultaneously serve multiple goals — political, economic and social — as per the research article authored in the Journal of Telecommunications Policy. While improved broadband penetration addresses the political agenda, the SOEs are responsible for a favourable rate of return on the state asset. Socially, these telcos also assume the role of job creators and assist in bridging the digital divide across regions and demographics of the country.

Arrest the slide

However, in India, the SOEs have lost their battle to the private telcos on all these issues. BSNL and MTNL account for just about 10 per cent of the wireless subscriber base and a miniscule 3 per cent in wireless broadband subscriber base; while reported loss of BSNL/MTNL combined is about 8,000 crores (as on March 2017); though BSNL and MTNL together employ about 2,25,000, they are no longer the job creators.

However, both these firms have rich assets. Though the Cabinet cleared hiving of the tower infrastructure of BSNL as a separate company, BSNL and MTNL account for about 15 per cent of mobile towers in the country; they hold about 15-20 per cent of total spectrum assigned for telcos in each service area; they together account for about 90 per cent of wireline subscribers in the country. BSNL and MTNL have some of the excellent telecom engineers, though they have lost many in recent times to private telcos.

With all these assets, why are government telcos floundering in recent years? The main reasons include (i) inadequate marketing of their services (ii) slow decision making with respect to purchase of equipment and managing contracts (iii) inadequate management flexibility in pricing plans, and sharing arrangements, (iv) poor vendor management, to name a few.

Though we have about 400 million broadband subscribers in the country, they are mostly concentrated in the urban centres. To penetrate the semi-urban and rural areas to reach a goal of “broadband for all” by 2022 as laid down in NDCP 2018, we need active involvement of the SOEs in India.

Some of the measures suggested to make SOES more productive include : (i) divesting government stake in BSNL to bring in professional board, and management (ii) merger of BSNL and MTNL (that serves only the Mumbai and Delhi circles) as a single entity. Both these options have political and social consequences. So does the government have a third option?

These SOEs have to be made accountable for the political, economic and social causes that they purport to serve. The government’s Digital India agenda cannot be sustained unless there is a robust broadband infrastructure and associated content available across the length and breadth of the country.

Hence politically, the SOEs should actively be involved in developing the infrastructure and services for the same. The government must not accept continued loss-making from these SOEs.

To ensure sound financial management, (i) fast depreciating assets must be taken off from the balance sheet; (ii) separate telecom tower subsidiaries must be hived off, and multiple tenancy based passive and active infrastructure shared (iii) improve utilisation of the telecom assets of these SOEs.

While reducing the workforce is not an option at least in the short run, the SOEs should be able upskill their workforce to be more productive in the Internet economy.

To sum up, the government has to reform telecom SOEs, in furthering development goals. – V Sridhar, Professor, IIIT – Bangalore

– The Hindu Business Line

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