Will the infusion of fresh capital into Bharat Sanchar Nigam Limited be enough to lift its declining fortunes?
Story so far: In a bid to boost overall competitiveness of Bharat Sanchar Nigam Limited (BSNL) in the steep domestic telecom market and put pressure on its balance sheet, the Union Cabinet on Wednesday approved another revival package of ₹ 1.64 lakh crore . The second reform package after 2019 is to be used over the next four years. The revival package will initiate measures on three fronts, namely, infusion of fresh capital to upgrade the services of the state-owned operator, strengthen its stressed balance sheet and strengthen its fiber by merging Bharat Broadband Nigam Limited (BBNL) and BSNL. Increase network. It is expected that the package can help in the turnaround in such a way that BSNL starts making profits in FY 2026-27.
How does the latest package propose to help?
There are three broad components in the package. With an effort to enhance its services, BSNL will be allotted spectrum in the 900/1800 MHz band through equity infusion at a cost of Rs 44,993 crore. Spectrum can be defined as the invisible radio frequencies over which wireless signals travel, facilitating phone calls and Internet access. Simply put, the allocation will help BSNL grow as well as strengthen its serviceable bandwidth. Thus, it will be able to provide high speed data while using a wider network presence, more importantly in rural areas. In addition to spectrum, to further its social objectives, the government will make a provision of ₹13,789 crore to the company to fund its operational viability gap in commercially unviable rural wireline operations carried out between 2014-15 and 2019-20 .
Additionally, the government is increasing its authorized capital from ₹40,000 crore to ₹1.50 lakh crore in lieu of its Adjusted Gross Revenue (AGR) arrears, provision for capital expenditure and allocation of spectrum. AGR refers to the fee-sharing mechanism that calculates the share of revenue that telecom service providers (TSPs) are required to pay to the government in the form of annual license fee and spectrum usage charges.
What was the 2019 package?
Among the more import features of the package was the proposed merger of Mahanagar Telecom Nigam Limited (MTNL) and BSNL. It was argued that since BSNL reaches out to the population in rural areas and MTNL is located in the metro cities of Mumbai and Delhi, the combination of their synergies would help in achieving a pan-India footprint. It was informed in April this year that the merger was delayed due to financial reasons including high debt of MTNL.
To help spur operations, the government had announced a capital infusion of Rs 20,140 crore to acquire spectrum. The overall package which was for MTNL and BSNL paved the way for raising long-term bonds for both the PSUs, for which the Center provided sovereign guarantee.
How is BSNL placed in comparison to its peers?
An essential metric to assess the health of telecom service providers is ARPU, i.e. average revenue per user. The social sector duties of BSNL indicate that all losses on capital assets are met from internal sources only. Thus, it is unable to respond quickly to technological innovations in the market like its private peers, such as the rapid transition from 4G to 5G. Thus, its ARPU influences and affects the bouquet of services. On the other hand, Bharti Airtel’s ARPU grew by around 23% in the March-end quarter, while Reliance Jio’s ARPU grew by 27% on a year-on-year basis.
An overview of Telecom Regulatory Authority of India (TRAI) monthly subscriber data between April and end-May shows that BSNL lost an average of 0.30% wireless subscribers every month during this period, while Bharti Airtel and Reliance Jio had jointly acquired wireless customers. 0.43% on average every month.
There is also a difference in the number of Base Transceiver Stations (BTS) held by the three companies. BTS is a device that sends and receives radio signals from mobile devices and routes them to other terminals of the network. According to data given in Rajya Sabha in February, Reliance Jio and Bharti Airtel had six and a half times more BTS, respectively, than BSNL.
What makes the industry so competitive? Is there any untapped opportunity?
According to the National Investment Promotion and Facilitation Agency, India’s telecom industry is the second largest in the world. The total tele-density of the country is 84.88%. However, a division exists between rural and urban areas. While the tele-density of the urban market is 134.70%, the rural market remains untapped at around 58.2%. However, at the end of May, both Reliance Jio and Bharti Airtel had almost five times more subscribers in rural areas than BSNL.
essence
The government will make a provision of ₹13,789 crore to BSNL to fund its operational viability gap in commercially unviable rural wire-line operations undertaken during 2014-15 and 2019-20.
An overview of the Telecom Regulatory Authority of India’s (TRAI) monthly subscriber data between April and the end of May shows that BSNL lost an average of 0.30% wireless subscribers every month during this period.
Reliance Jio and Airtel had six and a half times more BTS respectively than BSNL.