Eyeing ‘turnaround’, BBNL to merge with BSNL by month-end

The government had decided to merge BBNL and BSNL by the end of this fiscal year.

About Merger:

• BBNL is going to be merged in BSNL.
• This means that all of BharatNet work being done on an India basis will come to BSNL.
• The government has taken this policy decision.
• If BBNL is merged with BSNL, the latter’s 860,000 km of optic fibre, along with 560,000 km of fibre of BBNL’s can create a large integrated fibre network of 1.42 million km.
• Combined with BSNL’s extensive market presence across the country, this can give last mile connectivity for rural areas.
• With the merger of BBNL and BSNL, the USOF which currently stands at close to Rs 60,000 crore is likely to go to BSNL and help the state-run telco come out of its crunch.

Need of merger:

• The combined debt of BSNL/MTNL stood at Rs 59,588 crore as at January-end. Similarly, the adjusted gross revenue (AGR) dues (licence fee and spectrum usage charges) of the firms stand at Rs 43,148 crore at present. “If the firms need to survive, their balance sheets need to be repaired”.
• The government is considering converting the AGR dues into equity for both BSNL and MTNL.

About BBNL:

• BBNL, a special purpose vehicle (SPV) of the Ministry of Communications, was incorporated in 2012 as a public sector unit.
• It was handed over the task of implementing the BharatNet project, which was till then known as National Optical Fibre Network (NOFN).
• BharatNet, the world's largest rural broadband project is to provide broadband connectivity to all the 2.5 lakh gram panchayats across India.
• As far as BBNL is concerned, it currently to a large extent depends upon BSNL to provide connectivity and bandwidth
• The SPV is funded from the Universal Service Obligation Fund (USOF), which is raised from a Universal Access Levy (UAL) applicable to all telecom licence holders.
• It came into effect from April 1, 2002 and mandated that all telecom service providers must pay a percentage of their revenue into the USOF.

Issue:

• All telecom operators contribute to the USOF.
• So if the government goes ahead with this merger, it will seem like only BSNL will get to use the fund. That could create problems for BBNL.
• As per telecom licence agreements, telecom service providers have to pay 8 per cent licence fee on their revenue from sale of telecom service, of which 5 per cent goes towards the USOF.