The BSNL imbroglio

A decade after India first got 4G and when private telecom players are at the cusp of 5G deployment, government-owned BSNL is yet to be allotted 4G airwaves.

This has resulted in declining revenues and stagnating wireless market share for the company in the last few years.

The government now wants to transform the beleaguered telco into a financially viable, sustainable and vibrant player.
BSNL has suffered losses of Rs 50,631 crore in just the last five years, albeit narrowing its losses in FY21.

In fact, the last time BSNL reported a profit was in 2008-09.

The earlier package of 2019 had provided Rs 24,000 crore for 4G service but that could not be allocated as BSNL was not ready with technology.
And on Wednesday, the government came out with its second revival package for BSNL worth Rs 1.64 trillion with an aim to make the company profitable again by 2026-27.

Telecom is among the sectors deemed strategic, where the government intends to maintain a minimum presence with healthy PSUs.

The government says BSNL acts as a market balancer in the sector and plays a crucial role in the expansion of telecom services in rural areas, development of indigenous technology and disaster relief.

Despite the commercial non-viability, BSNL provides wireline services in rural and remote areas to meet the government’s social objectives. Spread over four years, the latest relief package comes with a cash component of almost Rs 44,000 crore and a non-cash component of Rs 1.2 trillion.

This includes administrative allocation of spectrum for 4G services at the cost of Rs 44,993 crore through equity infusion, capex funding of Rs 22,471 crore for the deployment of indigenously developed 4G stack and Rs 13,789 crore of viability gap funding for rural wireline operations.

A slew of steps is being taken to de-stress the balance sheets of BSNL as well as MTNL, which provides services in Mumbai and Delhi.

Both the PSUs will get a sovereign guarantee to raise long-term loans through bonds for an amount of Rs 40,399 crore while BSNL’s statutory AGR dues of Rs 33,404 crore will be converted into equity.

BSNL will be able to restructure its existing bank debt of Rs 33,000 crore.

Mahesh Uppal, Director, Com First India says it’s not too little too late, BSNL has a role to play. In some circles, BSNL has significant presence with satisfied customers. BSNL was starved of freedom of choice to select technology vendors.

Another measure is the merger of BBNL with BSNL to facilitate a wider utilisation of infrastructure laid under the BharatNet project – which aims to connect 6.5 lakh villages with broadband by 2025 but is way behind its target. By March 2022, only 27% of the villages received connectivity.

However, the infrastructure created under BharatNet will continue to be a national asset, accessible on a non-discriminatory basis to all the telecom service providers for the purposes of providing internet services through Wi-Fi hotspots, Fibre to the Home connections, leased lines, dark fibre, backhaul to mobile towers etc.

The 2019 package, worth some 70,000 crore rupees, also envisaged a merger of BSNL and MTNL which has since been put off.

About 40% of that revival package for the two state-run telcos was towards a VRS package for employees over 50 years of age. BSNL’s employee strength was brought down to less than 90,000 from over 1.65 lakh and as a result, its wage bill was cut down by half.

Mahesh Uppal says it makes eminent sense to merger BSNL and MTNL. Merger with BBNL will not help BSNL materially.

Further, to provide a shot in the arm for BSNL when it launches 4G services, the Cabinet has chosen the telco to execute a 26,316 crore rupee project for saturation of 4G mobile services in 24,680 uncovered villages in remote and difficult areas. This will be funded through Universal Service Obligation Fund.

Telecom Minister Ashwini Vaishnaw said BSNL has become a stable company, making operational profits.

But as experts say, along with monetary support, BSNL requires autonomy, support for its decision making and separation from government bureaucracy.

While government seems more focused on supporting BSNL, the telco has a long way to go before it Can make a meaningful turnaround. Business Standard