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Survival remains a challenge for BSNL

Another lifeline, in the form of a financial package worth more than Rs 89,000 crore, will keep state-owned Bharat Sanchar Nigam Ltd (BSNL) going amid stiff competition from top private players, such as Reliance Jio and Bharti Airtel. But, it’s never a good idea to throw good money after bad. Telecom has been identified as one of the four strategic sectors by the government, ruling out full privatisation. That, however, should not be a premise for the Centre to give such handouts to BSNL, which has been piling up financial losses and losing subscribers despite starting out as a monopoly in the market in which it operated and enjoying spectrum allocation without participating in the auction process, among other advantages.

The recent Cabinet decision to offer the financial package to BSNL, which was incorporated in September 2000, was not the first instance of such a bailout. This was, in fact, the third since 2019. In October 2019, it was given Rs 69,000 crore for merging with the other state telco operating in Delhi and Mumbai, Mahanagar Telephone Nigam Ltd (MTNL), along with other goals, including buying 4G spectrum. It’s another matter that the BSNL-MTNL merger is on the backburner, and there are indications that MTNL could be shut down with its operations being transferred to BSNL. As for 4G, BSNL has been in limbo, though private operators have been up and running for years. There was some action on this front recently. The July 2022 package, however, was the biggest, at Rs 1.64 trillion. It was meant for capex, settlement of adjusted gross revenue dues, and a merger with another state-run unit, Bharat Broadband Network Ltd, which was mandated to connect rural India through broadband.

The stated objective of the latest package is to help power BSNL with 4G and 5G services, while lifting the telco’s authorised capital to Rs 2.1 trillion from Rs 1.5 trillion now. Along with equity infusion, allotting 4G and 5G spectrum to BSNL was approved. Union Communications Minister Ashwini Vaishnaw has assured stakeholders that BSNL would stop losing subscribers within a few months as its 4G and 5G services pick up speed. This optimism needs a reality check. In an interview with this newspaper earlier this month, Bharti Enterprises Chairman Sunil Mittal pointed out operating in the telecom business required serious investment and that within a matter of 24 months, Airtel had spent Rs 40,000 crore on 5G spectrum itself. The company’s capital expenditure was around Rs 60,000 crore in these two years, making it a neat Rs 1-trillion outgo on establishing a new layer of technology. Prior to that, leading telcos have made massive investments in 4G and 3G. Mr Mittal was speaking in the context of a possible duopoly in the telecom market as Vodafone Idea has been going downhill.

Against that backdrop, the government and some in the industry are increasingly looking at BSNL to ensure that India doesn’t fall into the duopoly trap. It would be a positive development to have a strong BSNL compete with two private telcos, Reliance Jio and Airtel, but there is no doubt that India can ill afford to keep supporting uncompetitive state-owned telcos through large financial packages to prevent a duopoly scenario. The government would do well to start considering the privatisation of BSNL. A delay will only increase its financial burden as in the case of Air India.