A late call for BSNL

Funding lifeline is unlikely to transform the utility

It is ironic that on the second day of the hotly contested auctions among private telecom players for 5G spectrum, the government should announce a Rs 1.64-trillion lifeline for the ailing Bharat Sanchar Nigam Ltd (BSNL). The revival programme reveals how far the state-owned telecom service provider lags the technology curve. The package includes an administrative allocation of spectrum for 4G services, support for an indigenously developed 4G stack, viability gap funding for rural wireline operations, and fund-raising via sovereign guaranteed bonds, apart from an increase in government ownership by converting adjusted gross revenue (AGR) losses into equity and a preference share issue. The merger of Bharat Broadband Network Ltd, which was set up but failed to provide quality rural connectivity, with BSNL has also been approved.

This is the second rescue package for BSNL in three years, after a Rs 69,000-crore infusion in 2019, and it raises the question of whether the government is throwing good money — which it stands to earn from the 5G auctions to private telecom operators — after bad, just as the competitive momentum has changed radically. In principle, the government’s helping hand for its own utility is valid, given the concessions it extended to privately-owned Vodafone India and Bharti Airtel over AGR dues. Those have played a key role in the survival of the former. But both private utilities’ troubles were the result of problematic regulatory policies, whereas BSNL’s problems are fundamental. The telecom minister has said the implementation of this revival plan is expected to see BSNL turn around and make profit. This hope may rest on the fact that BSNL’s losses in 2020-21 narrowed to Rs 7,441 crore from Rs 15,500 crore in 2019-20 and the utility turned profitable at the operating level.
 

Though this is no small achievement, they are the result of housekeeping improvements rather than a fundamental expansion of its core business. Most of the gains have been made from a much-needed halving of the bloated salary bill via a voluntary retirement scheme and a slight reduction of high-cost debt. Against this, BSNL’s top line has been near-stagnant between 2019-20 and 2020-21 and its subscriber base has scarcely grown even though the utility was given a head start over private operators with preferential spectrum allotments. Its share in wireless and broadband is a paltry 9.7 and 2.9 per cent, respectively. In 2021, it even surrendered unutilised 2G spectrum in the 900 and 1800 MHz bands, though this is where most telecom operators have large numbers of subscribers, suggesting its inability to compete. It is unclear how BSNL will make profit if its focus is to shift to rural India. The government’s objective of improving rural connectivity is praiseworthy, but achieving this through viability gap funding points to the basic unviability of the exercise. Achieving a socio-economic purpose via a commercial corporation has never worked in the past and BSNL is unlikely to be a game-changer in this respect.