Will network sharing help BSNL and MTNL regain lost glory?

Recently, BSNL and MTNL have signed a MoU whereby both the operators will utilize network and infrastructure of each other for greater operational synergy and single window customer delivery. All this will result into greater synergy between the two organizations be it tower sharing, channel sharing, roaming and others.

First, with the MoU in place both MTNL and BSNL mobile customers can now roam pan India without paying anything extra which gives subscribers lot of value to stick to government operators.

Earlier, BSNL was providing mobile services pan India minus Delhi and Mumbai circle whereas MTNL was providing mobile services in Delhi and Mumbai. The memorandum will help in increasing mobile and 3G subscribers for both BSNL and MTNL and it will also help in increasing mobile revenues for both incumbent operators.

Second, the sharing of network and infrastructure will help in increasing mobile traffic loading in both BSNL and MTNL network which is far below the national average. Both the operators can now plan their capex for network optimization and better coverage thereby optimizing their infrastructure. The sharing of network and infrastructure will only be successful when MTNL and BSNL retail outlets and franchisees start selling mobile recharge coupons providing lot of convenience to mobile roaming customers.

The sharing of network and infrastructure will help enterprise division of both companies in a big way. BSNL will benefit a lot as the enterprise division can now focus on offering enterprise services pan India including Delhi and Mumbai where majority of corporate customers are located. Even large PSUs and state undertakings can benefit from this marriage as BSNL can now offer services pan India.

Third, the sharing has to move a step forward and both the companies should make a combined purchase as they can get best of rates from the vendor and also get lot of benefits. The network and infrastructure sharing should also include IT sharing so that both the companies have common standards and operators should also work on common standards also on infrastructure front. Both the companies can also launch a common mobile or broadband scheme which is applicable pan India. All this will provide lot of savings in the long run for both BSNL and MTNL.

One can definitely expect a 10 percent increase in revenues for both BSNL and MTNL but the big question is will network sharing help them regain lost glory. There would be an increase in topline with the announcement but will this decision help them to be profitable in the long run. The answer is definitely no as both the companies now need to shed their extra manpower which is more than the combined strength of all mobile operators in the country. To be competitive they have no other option but to go for job cuts or VRS if they plan to be a profitable company.

One thing is sure, the initiative of sharing network and infrastructure is the first step towards consolidation of both BSNL and MTNL which will help them in the process of privatization at a later stage. If the plan is to avoid privatization both the PSUs should plan to improve their market cap in the short run.

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