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BSNL got administrative allotment of 4G spectrum

  • Category
    Economy
  • Published
    5th Aug, 2022

Context

The Union Cabinet has allotted Rs.1.64–lakh crore package for the revival of state-owned BSNL to implement the Bharat Net Project.

About

  • BSNL was incorporated on October 1, 2000, by vesting with it the mandate of providing telecom services and network management hitherto done by the Department of Telecom (DOT), Government of India.
  • The government had announced a package in 2019 which reduced BSNL’s losses from Rs 15,500 crore in FY20 to Rs 7,441 crore in FY21.
  • The plan included measures to reduce the Staff cost through a Voluntary Retirement Scheme (VRS), administrative allotment of spectrum for providing 4G services, and debt restructuring by raising of Sovereign Guarantee Bonds.
  • The government had proposed a merger between BSNL and Mahanagar Telephone Nigam Limited (MTNL) to revive both the state-owned loss-making companies. However, the government deferred the merger.

What does the new package include?

  • The package includes cash support of Rs.3, 964 crore and non-cash support of Rs.1.20 lakh crore.
  • The cash proponent will be used for spectrum allocation, capital expenditure, and viability gap funding.
  • To improve existing services and provide 4G services, BSNL will be allotted Spectrum in the 900/1800 MHz band administratively at the cost of Rs.44, 993 crores through equity infusion.
  • With this spectrum, BSNL will be able to compete in the market and provide high-speed data using their vast network including in rural areas.

About Bharat Sanchar Nigam Limited (BSNL)

  • BSNL is a technology-oriented integrated telecom service providing company. It is a 100% Government owned Public Sector Undertaking.
  • BSNL’s share of wireline connections fell sharply to 28.7% at the end of May 2022, from 46.6% in October 2019.
  • The only consolation was that the number of its rural wireless subscribers shrank by just 11.4 lakh.
  • The intervening period has also seen BSNL shrink its workforce.
  • BSNL’s net loss narrowed appreciably to Rs. 7,453 crores during the FY2021.

Why is the government reviving BSNL?

  • While BSNL may not be able to compete with the private telecom majors in the country, it does have a good reach in rural and remote areas where the popular private telcos are yet to establish themselves.
  • Airtel and Jio have intensified efforts in the last few years but BSNL remains a strong player there.

What the Government Is Doing to De-Stress BSNL’s Balance Sheet?

  • The government is approving a sovereign guarantee bond issuance for the telecom service provider to repay the bank loans. BSNL has around Rs 33,000 crore as bank debt.
  • AGR dues of BSNL amounting to Rs 33,404 crore will be settled by conversion into equity. The government will provide funds to BSNL for settling the AGR/GST dues, adding "BSNL will re-issue preference share of Rs 7,500 crore to the government.
  • The government has also approved BSNL’s merger with Bharat Broadband Nigam Ltd (BBNL). This will give BSNL an additional 5.67 lakh kilometers of optical fibre in addition to its 6.83 lakh kilometers.

Benefits of 4G spectrum allocations

  • Savings in the contribution From revenue (which will be lost eventually in the absence of 4G)
  • Continued market presence of BSNL; and
  • Possibly improved morale of the BSNL employees.


How will it help the government to Manage and Save the Ailing Telecom Company?

  • The revival package would initiate measures on three fronts:
  • Infusing fresh capital for upgrading the state-owned operator’s services
  • Strengthening its stressed balance sheet
  • Augmenting its fiber network by merging Bharat Broadband Nigam Limited (BBNL) and BSNL
  • It is expected that the package could help with a turnaround in such a manner that BSNL starts earning profits in FY2026-27.
  • Spectrum - The allocation would help BSNL increase as well as consolidate its serviceable bandwidth.
  • Thus, it would be able to provide high-speed data utilizing a vaster network presence, more importantly, in rural areas.
  • Social objectives- The allocation will help the company to fund its operational viability gap in the commercially unviable rural wireline operations that were undertaken between 2014-15 and 2019-20.
  • Authorized capital- The Government would also be increasing the authorized capital to Rs.1.50 lakh crore in lieu of its adjusted gross revenue (AGR) dues, provision of capital expenditure, and allotment of spectrum.

Challenges

  • Technological/Market: These include the rapid evolution of technology (5G, IoT), fast-evolving consumer needs for data consumption, changing demographic patterns, and the increasing role of content in driving businesses. Such a combination of technology/market characteristics requires organizations to have agility, build partnerships, reduce costs, and be innovative.
  • On all these dimensions BSNL has significant challenges. The mechanism for responding to the challenges is not elaborated as it is included in the part on organizational challenges.
  • Policy Environment: Since BSNL is 100% government owned it is often subject to delays and decisions made by the government. For example, while the government has transferred its liabilities (i.e. Workforce) to BSNL, the transfer of land and building assets are yet to be completed. There seems to be a lot of confusion surrounding the ownership of the Land and building assets of BSNL.
  • Organizational: These are specific to the systems and processes adopted by BSNL. These relate to delays in procurement due to its efficiencies and the need to follow guidelines for public procurement; centralization of deployment of tariff plans, leading to inflexibility in service offerings; poor linkage of performance with incentives, frequent transfers, etc. The larger challenges relate to developing organizational responses to rapid developments in the sector, building partnerships, and enhanced marketing orientation.

Conclusion

Effective and credible leadership, leveraging on its DNA, and focusing on strategic services with quality are three main necessary steps for the revival of BSNL.

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