NEW DELHI: The government on Wednesday announced a massive revival package of nearly Rs 70,000 crore for the ailing telecom PSUs BSNL and MTNL as it looks to nurse back the “strategic”, but heavily bleeding, companies to health and profitability over the next three-four years.The two companies – which together hold about 14% market share in the mobile business — will also be merged. The merger will await sorting out of some operational and regulatory issues since MTNL is a listed company.
The revival package aims to make the loss-making companies competitive again by giving them access to 4G spectrum; helping them retire a large number of employees through an attractive VRS package; and monetising their locked assets such as large swathes of land, and telecom towers.
“BSNL and MTNL are strategic assets of India… they will not be closed, or disinvested, or hived off to any third party,” telecom and IT minister Ravi Shankar Prasad said, minutes after the revival package was cleared by the Union Cabinet chaired by Prime Minister Narendra Modi.TOI was the first to report on the proposed mega package that was being worked out to bail out the sick PSUs in its edition dated July 3.The financial relief, which was also praised by home minister Amit Shah, ends months of speculation around the fate of the two companies, especially as certain sections even within the government were opposed to the idea of any broad-based monetary package.BSNL, with estimated loss of Rs 13,804 crore in 2018-19, has pan-India operations, except for Delhi and Mumbai. The two metro markets are covered by MTNL, whose losses in 2018-19 were pegged at Rs 3,400 crore.Prasad said the government is confident that the two companies will be operationally profitable over the next two years, and may become fully profitable by the year 2023.BSNL and MTNL, once the shining jewels in the government’s PSU line-up, have been a drain on the exchequer for the last decade as competition from private operators hit their businesses hard. They lost subscribers and failed to keep pace with technology changes.As landline numbers started shrinking, their operations were also pulled down due to a cocktail of negative factors such as poor management, high staff cost, government meddling and very poor customer service.Manpower has been a major drain on the revenues of the two companies with an official report prepared in June pegging the staff cost as a percentage of revenues at 77% for BSNL, and 87% for MTNL (based on 2018-19 financial numbers).
Despite the government’s commitment, revival of the two companies appears to be a tall order due to the stiff competition in the telecom sector especially after the launch of Reliance Jio in September 2016.
The competition has already seen tariffs hit rock bottom even as usage of both voice and data has gone up manifold. The crunch is so severe that even much-experienced and battle-hardened operators such as Airtel and Vodafone-Idea are struggling to salvage business as they run into losses and mounting debt.
Prasad said that debt is one area where BSNL and MTNL are relatively better off. “The duo has a total debt of around Rs 40,000 crore, which is the lowest for any telecom company in India.”
The companies will now need to draw up a fresh revival strategy, while also working out VRS packages, asset monetisation and 4G rollout. The additional capital expenditure of putting the telecom infrastructure for 4G itself is pegged at around over Rs 10,000 crore.