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BSNL Revival Package: Will The Government Manage To Save Ailing Telecom Company?

BSNL Revival Package: Will The Government Manage To Save Ailing Telecom Company?

The package includes cash support of Rs 43,964 crore and non-cash support of Rs 1.20 lakh crore

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The government is yet again looking to revive the state-owned Bharat Sanchar Nigam Ltd (BSNL) with a Rs 1.64 lakh crore package 
With this, the government aims at improving the quality of BSNL services, to de-stress its balance sheet, and expand the company's fiber reach by merging it with Bharat Broadband Network Limited (BBNL).

The revival package for BSNL comes at a time when the leading private telcos of the country are bidding for 5G spectrum. The question is, will the package be enough to save the state-owned telecom company?

What Is Included In The BSNL Revival Package?

The package includes cash support of Rs 43,964 crore and non-cash support of Rs 1.20 lakh crore. 

The cash proponent will be used for spectrum allocation, capital expenditure and viability gap funding, minister for telecom Ashwini Vaishnaw said.

"To improve existing services and provide 4G services, BSNL will be allotted Spectrum in 900/1800 MHz band administratively at the cost of Rs 44,993 crore through equity infusion. With this spectrum, BSNL will be able to compete in the market and provide high speed data using their vast network including in rural areas," an official release stated.

What The Government Is Doing To De-Stress BSNL’s Balance Sheet?

​​The government is approving a sovereign guarantee bond issuance for the telecom service provider to repay the bank loans. BSNL has around Rs 33,000 crore as bank debt.


"AGR dues of BSNL amounting to Rs 33,404 crore will be settled by conversion into equity. Government will provide funds to BSNL for settling the AGR/GST dues," the official release said, adding "BSNL will re-issue preference share of Rs 7,500 crore to the government".
The government has also approved BSNL’s merger with Bharat Broadband Nigam Ltd (BBNL). This will give BSNL an additional 5.67 lakh kilometre of optical fibre in addition to its 6.83 lakh kilometres. 

Will BSNL Be Able To Compete With Private Players After This Package?

As per the latest release by the Telecom Regulatory Authority of India, As on May 31, 2022, the private telecom service providers held 89.87 percent market share of the wireless subscribers, whereas BSNL and MTNL, the two PSU access service providers, had a market share of only 10.13 per cent.

At a time when leading private telcos are aggressively bidding for 5G spectrum, it would be a tough task for BSNL to face its rivals who are currently well established and better placed in the market.

So far, Reliance Jio, Bharti Airtel, Vodafone Idea, and Gautam Adani have put in bids of about Rs 1.45 lakh crore to buy 5G airwaves.
However, the government seems to keep BSNL for a “defined set of customers” and expecting the loss-making telecom company to turn profitable. The government’s official release said with the implementation of the revival plan, BSNL will turn-around and "earn profit in FY 2026-27".

"We will hold BSNL to very clearly defined outcomes, clearly defined goals…what we are infusing here is taxpayers’ money," Vaishnaw said.

The BSNL also does not offer 4G connectivity in all areas in the country as the government cancelled the 4G tender for BSNL in 2020. 
The government also expects BSNL to expand 4G services to raise ARPU (average revenue per user) to Rs 170-180 after its revival package.

The administrative allocation of spectrum for 4G and 5G services for BSNL has also been approved by the Cabinet. 
BSNL has a debt of Rs 33,000 crore, according to a news report in News18.com. However, as on March 31, 2022, Vodafone’s total debt (including interest accrued but not due) was Rs 197,878 crore while Airtel’s has a net debt (excluding lease liability) of Rs 1,23,500 crore. 

Why The Government Is Reviving BSNL?
 

While BSNL may not be able to compete with the private telecom majors in the country, it does have a good reach in rural and remote areas where the popular private telcos are yet to establish themselves.

Airtel and Jio have intensified efforts in the last few years but BSNL remains a strong player there.

Has The Government Announced A Revival Plan For BSNL Earlier Also?

In a written reply to Lok Sabha, Minister of State for Communications Devusinh Chauhan said BSNL has suffered a loss of Rs 50,631 crore in the past five years.

The government had announced a package in 2019 which reduced BSNL’s losses from Rs 15,500 crore in FY20 to Rs 7,441 crore in FY21.

The plan included measures to reduce the Staff cost through a Voluntary Retirement Scheme (VRS), administrative allotment of spectrum for providing 4G services, and debt restructuring by raising of Sovereign Guarantee Bonds.

The government had proposed a merger between BSNL and Mahanagar Telephone Nigam Limited (MTNL) to revive both the state-owned loss-making companies. However, the government deferred the merger.

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