BSNL and MTNL may shed flab and get 4G spectrum as a part of the proposed ₹740 billion bailout plan

• The central government is working on a ₹ 740 billion bailout proposal for loss making state-owned firms BSNL and MTNL.
  
• The proposal includes an exit package for the Voluntary Retirement Scheme (VRS), an additional 5% compensation, along with providing for the 4G spectrum and capital expenditure.
  
• BSNL at an estimated loss of ₹138.04 billion is country’s biggest state-owned loss maker, while MTNL stands at third after Air India, at ₹ 33.98 billion loss.
  

The central government is working on a ₹ 740 billion bailout plan for Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telecom Nigam Limited (MTNL), the two state owned telecom companies, which are continuing on their decade long downtrend, Times of India reported.

The proposed bailout plan includes an exit package for thousands of employees, which includes an additional 5% compensation as an ex-gratia amount for the Voluntary Retirement Scheme (VRS).

The plan also provides for growth with amounts earmarked for 4G spectrum, and capital expenditure.

Top loss makers

BSNL and MTNL are among the country's biggest loss making state owned entities. The top spot went to BSNL which has an estimated loss is at ₹ 138.04 billion. The third spot is occupied by MTNL after Air India, as its losses are at ₹33.98 billion.

MTNL provides telecom services in Mumbai and Delhi, while BSNL provides it in rest of the country.

The ministry of telecommunications’s proposal seeks revival of both the firms from other ministries. In response, the Ministry of Finance had asked the Department of Telecommunications to rework the proposals.

Competitive Strength

One of the plans is for the government to modernise these state-owned firms, so that they can compete with the aggressive players in the market like Reliance Jio, Airtel and Vodafone Idea.

If it is passed, the government will allot the 4G spectrum which is valued at ₹ 200 billion and the rollout cost which is ₹ 130 billion will be paid by the PSUs, as per reports.

BSNL and MTNL have lost market share in the mobile services business and their Average Revenue per user (ARPU) is a meagre ₹38 compared to ₹70 of private telecom entities.

This trend has continued in the last one decade owing to poor management, high staff cost, government’s unwanted intervention and the very slow rate of technology upgradation.

Shutting down costlier

The department of telecom had argued in favour of the bailout plan proposal, saying that shutting down the PSUs will cost the government ₹1.2 trillion.

As a plan for divestment in these companies might be delayed due to stressed telecom market, they might now look at joint ventures as an option.

The government is also considering bringing the retirement age from 60 to 58 to bring down the costs of companies and reduce their losses.

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