BSNL-MTNL Merger: After months of discussion and consideration of several options which also included a complete shut down of the two telecom PSUs – BSNL and MTNL, the Modi government finally approved a revival package for the national telecom operator BSNL just ahead of Deepawali. The revival package approved by the union cabinet entails merger of MTNL with BSNL, giving a pan-India foot-print to BSNL to take on the challenges posed by more aggressive and agile telecom operators like Airtel, Vodafone and Idea. Though the company was incurring losses since 2009-10, however, it was the entry of Mukesh Ambani’s Jio Telecom in the telecom sector in 2016 and its aggressive tariffs that aggravated the situation for the public sector telecom giant. However, given the inherent strength and importance of the company for the country’s strategic security, BSNL employees were confident that the company can be turned around in the next 3-4 years and the government will soon come up with a package for its revival despite a slew of negative news in recent times.
“BSNL and MTNL are neither being divested or closed,” said telecom minister Ravi Shankar Prasad following a meeting of the Union cabinet that cleared the revival package for the two PSUs.
The meeting of union cabinet chaired by Prime Minister Narendra Modi cleared the revival plan that includes raising of Rs 15,000 through sovereign bonds, monetisation of properties and assets worth Rs 38,000 crore in the next four years and the government will provide Rs 29,937 crore.
The revival package also includes offering voluntary retirement from service (VRS) to a sizeable chunk of BSNL and MTNL staff. According to the sources, nearly two-thirds of MTNL staff will be retired if the government reduces the retirement age from 60 years to 58 years and offers an attractive VRS package to aging employees.
According to the industry sources, this was the inherent strength of the BSNL that tilted the balance in its favour as the company came back from the brink of a complete shutdown. These are the five factors that tilted the balance in BSNL’s favour.
Largest Optical Fibre Network in the country
As the only national telecom operator, BSNL is not only strategically important for the country but it also has the largest optical fibre network (OFC) in the country. While BSNL has a 7.5 lakh kilometer long optical fiber network which is spread across the country, India’s largest telecom operator, Mukesh Ambani’s Jio Telecom has OFC network of nearly half the length at around 3.25 lakh kilometers, followed by Airtel (2.5 lakh kms) and Vodafone Idea (1.6 lakh kms), according to the data compiled by Sanchar Nigam Executives Association (SNEA).
Properties at premium location
According to the sources, BSNL has lands and properties at premium locations across the country with an estimated value of over Rs 3 lakh crore. The revival plan approved by the Modi government includes arranging Rs 38,000 crore in the next four years through monetisation of BSNL’s land and properties.
Comparative small loan book
Despite incurring losses since 2009-10, the BSNL’s loan liabilities were the smallest among the large public and private telecom operators. According to the sources in BSNL, the company has a loan liability of just Rs 20,000 crore. Whereas the cumulative loan liabilities of the telecom sector are estimated at around Rs 4.25 lakh crore. Vodafone India has a loan liability of Rs 1.18 lakh crore followed by Reliance Jio (Rs 1.12 lakh crore) and Airtel (Rs 1.08 lakh crore).
Large tower base and contribution in BharatNet project
According to the company sources, BSNL has over 66,000 towers across the country. BSNL has created a separate company – BSNL Tower Corporation Limited (BTCL) – to monetise its huge investment in the tower infrastructure. The company aims to follow the tower sharing model to capitalise the large number of mobile towers it has.
In addition to this, nearly 90% work of Prime Minister Modi’s flagship scheme – BharatNet – is executed by the BSNL whereas the work executive by two other internet service providers – RailTel and PGCIL accounts for less than 10% of the total work.
BSNL’s improved performance
According to the industry sources, BSNL improved its market share, customer base and registered operating profit for three consecutive years – FY 2014-15, 2015-16 and 2016-17 before suffering a setback due to aggressive pricing by Reliance Jio. The public sector telecom giant improved its performance at a time when the telecom sector, in general, was under stress and several companies such as Aircel, Reliance Infocom, Tata Tele Services were either forced to close the operations or opted for mergers and consolidation like Vodafone and Idea.
In addition to these top five factors that changed the thinking within the government, one important factor was the need for the government to have a public sector company in telecom sector for strategic reasons, particularly to manage telecom network in border areas. BSNL is also one of the first responders in case of natural calamities as it is called to restore the communication links in the areas hit by natural disasters. Unlike private telecom players, BSNL also operates 17,000 loss-making exchanges in rural and other far-flung areas under its universal service obligations.
Recognising this aspect, telecom minister Ravi Shankar Prasad last week hinted about BSNL’s strategic importance for the country that dispelled the reports about a complete closure of BSNL-MTNL.