Recently, a group of ministers met to discuss a revival plan for the ailing state-run telcos, BSNL and MTNL. A slew of measures are being considered, including the monetisation of land and building assets, to fund their voluntary retirement scheme (VRS) for employees. Between them, the two telcos have over 184,000 employees. In fact, about 75 per cent of BSNL’s gross revenues go towards its employees.
Among the measures being considered is the monetisation of telecom assets such as towers and fibre. The value of the combined OFC network and mobile towers of BSNL and MTNL is estimated at Rs 600 billion and Rs 350 billion respectively.
Interestingly, the financial woes of BSNL and MTNL are not new, nor are the discussions around their revival. Several plans have been drawn up for their revival, but these have failed to take off.
In fact, in June this year, there were reports about the government planning a bail-out package of Rs 730 billion, a large part of which would go towards financing VRS for employees, and the rest for 4G spectrum payments and service roll-out.
The money is definitely big and would help BSNL and MTNL bounce back in the 4G-dominated telecom market. But it will not be enough to stay competitive in the current environment. In other words, even bigger money will need to be pumped in to ensure that the two companies stay afloat and compete effectively with their private counterparts.
The industry is already talking about making the big 5G switch and the state-run telcos cannot afford to stay out of the race. Under the existing government arrangement, BSNL and MTNL are allotted spectrum at prices discovered in the auctions. Thus, even after the current bail-out, many more billions will be required over time to establish a 5G business and ultimately, help the two companies return to health.
The government could look at several strategic options – reviving, downsizing or shutting down. Clearly, it’s time for it to take decisive action on the future of the two telcos.
