Rs 1.64-trn revival package for BSNL comes too late in the day: Analysts

The government should have merged BSNL and MTNL, and then looked at such a move, says an analyst

The government’s Rs 1.64-trillion revival package for beleaguered BSNL has come in too late, said analysts who expect stiff competition for the state-owned telco from the private players who are already queuing up and spending heavily on securing the 5G spectrum. 

“The package has come in too late. That apart, the government is planning to make administrative allocation of spectrum to BSNL to offer 4G services. All this is at a time when the government is auctioning the 5G spectrum. That apart, the BSNL will not be able to offer services Delhi and Mumbai –two of the busiest circles for telecom operators. The government should have merged BSNL and MTNL, and then looked at such a move,” said A K Prabhakar, head of research at IDBI Capital. 

On Wednesday, the Union Cabinet approved a Rs 1.64-trillion revival package for BSNL that aims not only to improve its services, but also help de-stress BSNL's balance-sheet and help expand its fiber network. As part of the package, Bharat Broadband Network Ltd (BBNL) will be merged with BSNL. 

BSNL was incorporated on October 1, 2000 and took over the business of providing telecom services and network management from the erstwhile Central Government Departments of Telecom Services (DTS) and Telecom Operations (DTO). According to reports, BSNL is India's oldest communication service provider and its history can be traced back to the British era. It was once a Navatna company, but became sick with accumulated losses of over Rs 90,000 crore, reports suggested. 

Earlier in 2019, the government had planned to merge BSNL and MTNL, which included plans to raise sovereign bonds to the tune of Rs 15,000 crore, monetise assets amounting to Rs 38,000 crore and a voluntary retirement scheme (VRS) for employees over the next four years. This, however, got shelved in 2021. 

“This step is a bit too late, in my view. For reviving BSNL, besides the technology and cash infusion, the mindset of the employees also needs to undergo a sea change. BSNL has to come up to speed with technological advancements and be more competitive. If the government can bring about a mindset change in the BSNL employees, such measures can prove to be beneficial over time,” said G Chokkalingam, founder and chief investment officer at Equinomics Research. 

Ambareesh Baliga, an independent market analyst, suggested that though the 5G spectrum will be allocated soon, it will be a bit longer for the customers to experience it seamlessly. The silver lining for BSNL amid this, he said, is if the company can get its act together fast and capitalise on the opportunity of offering 4G service in rural areas. 

"The 5G network would be for those who can afford to pay a higher price for better connectivity. For the masses, even in rural areas, 4G network is still the king. If implemented swiftly, it will be a good achievement for BSNL. The question is whether the government should spend on cleaning up BSNL or look for a strategic buyer only for business (keeping aside the real estate). Alternatively, have another profitable government company Railtel to implement connectivity in rural areas, which are in the vicinity of the railway tracks, as Railtel has exclusivity and right of way along the railway network," Baliga said. 

Points to ponder

• Govt should have merged BSNL and MTNL, and then looked at such a move, say analysts
• For the masses, even in rural areas, 4G, not 5G, is the king
• BSNL’s history can be traced back to the British era. It was once a Navatna company
• Centre can have another profitable govt firm, like RailTel, to implement connectivity in rural areas, say experts