A sub-optimal solution

BSNL-BBNL merger will not help

The proposed merger of Bharat Broadband Network Ltd (BBNL) with Bharat Sanchar Nigam Ltd (BSNL) is nothing but a lifeline for loss-making public sector undertakings (PSUs). BSNL Chairman and Managing Director P K Purwar’s statement that the government had given a turnaround opportunity to the state-owned telco through the merger confirms that. The Union government is expected to loosen the purse strings to ensure there is no capex crunch for BSNL at least for two years as the state-owned telco leads the amalgamated entity. While the government action may be guided by the right intention of reviving loss-making telecom PSUs, the merger formula is unlikely to help meet India’s rural broadband objectives set for BBNL or reduce the losses of BSNL.

BBNL was established in 2012 to empower the hinterland with quality broadband connectivity required for services such as telemedicine and online education. A decade later, the country is faced with a far from satisfactory outcome: BBNL’s rural broadband vehicle – Bharat Net – is way behind its target of connecting some 600,000 villages by the year 2025. But the poor performance of BBNL should not be a reason to complicate the operations of already stressed BSNL. In fact, the idea of setting up BBNL was that rural broadband should be a single-minded goal of an organisation, with the help of the Universal Service Obligation (USO) Fund. That was when rural broadband, which was part of the BSNL mandate until then, was given to BBNL. The break made in 2012 should not be undone through the proposed merger.

BSNL is already late in introducing 4G services even as private telcos are preparing for 5G spectrum auction. The cumulative losses incurred by BSNL and MTNL (which too may be merged with BSNL-BBNL) were pegged at ~95,701 crore and ~35,348 crore, respectively, as of 2020-21. These telcos have also witnessed a mass voluntary retirement scheme offered in 2019-20. The decision to merge BBNL with BSNL was taken after the 10-year-old organisation failed to get any response to a bid floated for private participation in stepping up rural broadband recently. The proposed arrangement may upset the primary goal of Bharat Net to provide equal access.

Even as BSNL has claimed that as a custodian of the USO Fund corpus, which is over ~58,000 crore, it will ensure that all its assets are made available to all service providers on the arm-length principle, the government should introspect more. Rather than clubbing all the loss-making state-owned telecom units, the government must explore ways of a turnaround. If BBNL failed to get private bids in its move towards a PPP structure, it should make it work now. Stakeholders have raised issues over difficult terms and conditions in the tender while pointing out that the revenue-sharing arrangement proposed by the government does not make business sense. Then there are logistics issues. For instance, getting right of way from state authorities in laying optical fibre cable has been a challenge. The execution of service-level agreements too has been highlighted by private telcos as an obstacle when they have taken Bharat Net fibre, resulting in quality issues. While the government may have given BSNL a diktat of “perform or perish” with a free hand to meet the rural broadband target by 2025, a non-compatible mega merger is not the way to go.