Disconnected lines

Public sector telcos continue to lose ground

Although a bit late in the day, the government recently took steps to prevent the telecom sector from becoming a duopoly. After the relief package announced in September 2021 to grant a moratorium on unpaid statutory dues and cut in spectrum usage charges, the government is reportedly planning to return bank guarantees worth Rs 23,000 crore to telecom firms in connection with their dues on account of adjusted gross revenues. Telecom firms, including cash-strapped Vodafone Idea, have responded to the government steps by raising tariffs and announcing fresh fundraising with promoters’ participation. While the government has done well to provide relief, there is another area in the sector that requires its attention. This relates to public sector undertakings (PSUs) in telecom — Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) — with the latter named a Navratna with much fanfare in 1997 and subsequently listed on the New York Stock Exchange. BSNL caters to all of India except Delhi and Mumbai, which are serviced by MTNL.

It’s not that the government has not given any lifeline to BSNL and MTNL, but the time has passed for any more sops to these state-owned telcos, which have accumulated hefty losses over the years. The cumulative losses incurred by BSNL and MTNL were estimated at Rs 95,701 crore and Rs 35,348 crore, respectively, as of 2020-21. At this point, the government may not be looking at selling BSNL or MTNL because they fall in the strategic sector. The government has defined telecom as a strategic sector, which is expected to have a minimum presence of PSUs. That stand, however, will need to be reviewed as piecemeal sale of assets may not be the best way to keep the public sector telcos afloat with their large employee base and high wage bill even after the mass voluntary retirement scheme (VRS) offered in 2019-20. The VRS, which cost the exchequer around Rs 70,000 crore, saw more than half the employees of BSNL (78,569 of the 153,000) and 80 per cent of those of MTNL (14,400 out of the 18,000) leave.
 

A recent government attempt to sell some properties of BSNL and MTNL through auction failed to find any bidder. While the government may try to sweeten the deal, it may not go a long way in addressing the complex challenges facing these firms. There’s no doubt that the public sector telcos have witnessed decades of neglect and that they have been misused by successive governments in multiple ways. As part of reform, the BSNL-MTNL merger has been a favourite proposal for years. Such a plan is in the offing again. But for it to succeed, a systemic shift is needed.

At this point, when private telecom firms are strategising on a 5G spectrum auction, BSNL is preparing to place orders for 4G equipment. Thus, BSNL is a generation behind others. Once a sole operator and then a dominating leader in the landline phone segment, public sector telcos’ share has now fallen to 43.5 per cent. In wireless, where BSNL was a leading telco before the decline began more than a decade ago, private telcos have a market share of 89.81 per cent, limiting the reach of the PSUs at 10.19 per cent. In broadband too, they are at a dismal distance from the private sector leaders. In such a backdrop, to bring BSNL and MTNL up to speed is a tall task.