State support and spectrum allocation allow BSNL to ring up business

State-owned telecom firm's challenge is in deploying resources that it has been given in terms of finances and airwaves

BSNL is possibly turning the tide on its telecom business. The reasons are two developments including that of last week’s cabinet approval to give more airwaves to the government-run company.  The other is the announcement by Tata Consultancy Services (TCS) led consortium that it has received an advance purchase order valued at over Rs 15,000 crore from BSNL to deploy a 4G network across India. TCS noted this in a regulatory filing in late May. Tejas Networks, a subsidiary of Tata Group, is a part of the consortium and will supply and service the radio access network equipment.

Tata Consultancy Services (TCS) said in a regulatory filing in late May that Tejas Networks, a Tata Group subsidiary, is a part of the consortium that BSNL has contracted to supply and service radio access network equipment.

A big chunk of the airwaves worth Rs 89,047.82 the government has given BSNL will be used to deploy a 4G network the Indian Army, Navy, and Air Force will use. The armed forces have told the union cabinet they expect BSNL to roll out the network in their locations nationwide by September. A government statement issued after the cabinet decision about BSNL in June said one task of the company would be to “provide services/spectrum for Captive Non-Public Network (CNPN)”. A further government announcement is expected soon.

“This was valuable support from the armed forces for the company”, said a senior government official who didn’t want to be named. BSNL’s subscriber base is not expected to use 4G\5G at a significant scale to justify the government’s investment in the company. The armed forces, which vacated about 200 megahertz of spectrum in 2018 to give telecom networks the space to expand, have pent-up demand for superior service. 

The fly in the ointment is that the spectrum the Digital Communications Commission has allotted BSNL is not the best for deploying 4G. Within the government, the exception is that BSNL and the TCS consortium will help India in deploying an indigenous 4G network to rival those of Ericsson or Huawei. TCS’s technology can also be bought by other Indian networks for their services.

The finance ministry is happy as the financial support for BSNL will be cash neutral. Earlier rounds of support (see table) involved cash outgoes to finance capex and pay BSNL who took VRS, but this time no money left the government purse.

“Today India has two strong operators (Reliance Jio and Bharti Airtel), with the other two operators (Vi and BSNL) in ill health and in need of external help,” wrote Aditya Suresh and Baiju Joshi in a research report for Macquarie Capital Securities in May. The government is financially helping Vi, a private company, and BSNL.

BSNL has been permitted to raise its authorised capital to Rs 2.1 trillion from Rs 1.5 crore. This would not have been possible unless it was able to show it had a viable business plan.

BSNL’s challenge is that for 4G services the best airwaves are of 800 MHz range. Cell phones and other devices developed for 4G are configured to work best in this range. In the spectrum allocation made to BSNL, it is instead the adjacent 700 MHz that has been made available by the Commission. BSNL gets spectrum as allocation, not through auctions. In the spectrum auction last year, no telecom company bid for the 700 MHz band because there is no ecosystem of equipment that would justify the expenditure.

For years, cash-strapped BSNL sat back and watched as other operators expanded their business. It is not that the government was not keen to allot valuable bands to BSNL. In the 2015 auction, the department of telecommunications offered only one slot of 3G spectrum and retained the remaining for possible use by BSNL later. "And due to that delay just like 700 MHz, a large chunk of the spectrum useful to offer 3G services is still lying waste," said telecom analyst Parag Kar.

BSNL holds sufficient space in 1800 MHz but it has been unable to deploy the capacity useful for offering both voice and data in urban India. How it deploys 4G must draw lessons from such issues.