Will financial support revive BSNL and MTNL?

The Union Cabinet on Thursday approved a refund of about Rs 11,258.48 crore on surrender of Broadband Wireless Access (BWA) spectrum by state-run MTNL and BSNL.

The amount to be refunded to BSNL is Rs 6,724.51 crore and Rs 4,533.97 crore for MTNL to meet their financial commitments such as operation and maintenance of their telecom network.

BSNL has surrendered six circles- Gujarat, Maharashtra, Andhra Pradesh, Karnataka, Tamil Nadu and Kolkata. Out of the six circles, five are category A circles and one is metro circle. In the case of MTNL both are metro circles of Delhi and Mumbai.

Speaking on refund of upfront charges to BSNL and MTNL, Manish Tiwari, minister for information and broadcasting said, “The payout would be staggered and done over a period of time. The GoM was of the view that BSNL and MTNL did not participate in the auction of BWA spectrum, so it would be better to refund the amount that would contribute to their revival.”

Industry experts feel that no amount of refunds or funds will be able to revive BSNL and MTNL as problem is not with the business model but large employee base and somebody has to take a call on the employee base if they plan to revive BSNL and MTNL. The big question is will somebody take a call or do we need to keep on pumping money at regular intervals to make BSNL and MTNL employees feel happy in some context or the other?

Let’s look at the basic problem. First, BSNL has a total employee base of 270,000 whereas MTNL has a base of 40,000. Cumulatively, they contribute 310,000 employees which is many times more than the cumulative employee number of all mobile and fixed operators in India.

Second, the two together contribute Rs 29,825 crore in FY 2012-13 which is less than Vodafone India’s revenue. Vodafone India has a total employee base of 12,000 and India revenues for FY 2012-13 are in the range of Rs 35,610 crore. So, the big question is when Vodafone India can do a higher revenue number from 12,000 employees why do BSNL and MTNL need 310,000 employees for doing a lesser number and providing telecom services in same number of circles?

Third, with the returning of BWA spectrum in 8 circles (metro and Category A circles), the revenues for BSNL and MTNL will further come down in future as Reliance Jio will now get a monopoly environment in BWA as no operators have a pan India spectrum except BSNL and MTNL. This gives Reliance Jio a major advantage as the policy makers by getting BWA spectrum from BSNL and MTNL in 8 circles is also giving Reliance Jio lot of leeway by eliminating their competitors in key circles even before they start their services.

According to industry estimates, these 8 circles will together contribute around 80 percent of broadband revenue for operators. In FY 2012-13, broadband contributed around Rs 4,229 crore revenue for both BSNL and MTNL.

Private telcos killed BSNL and MTNL by getting their voice subscribers and now Reliance Jio will focus on churning broadband subscribers from MTNL and BSNL whenever they start their services. So, the big question is, will BSNL and MTNL stop broadband march of Reliance Jio or be dependent on DoT for funds?

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