Telecommunications Minister Ashwini Vaishnaw told Lok Sabha in early March that BSNL was making operating profits and was a stable entity. Separately, he was told that there was no proposal to divest MTNL or BSNL.
Telecommunications Minister Ashwini Vaishnaw told Lok Sabha in early March that BSNL was making operating profits and was a stable entity. Separately, he was told that there was no proposal to divest MTNL or BSNL.
The story so far: Telecoms Minister Ashwini Vaishnaw said during the recently concluded parliamentary budget session that state-owned telecoms operator BSNL is now a stable entity and making operating profits. In addition, the telecoms secretary told the House of Representatives that the telecoms service provider will soon be able to roll out its self-developed wireless and 4G core network.
Operating profit refers to the revenue remaining to a company after deducting its variable and fixed operating expenses. Unlike net income, it takes into account debt, one-time costs, and taxes.
In 2019, the Union cabinet had approved a proposal to revitalize BSNL and MTNL, which included measures such as a merger of the two companies, reducing employee costs, restructuring debt through borrowing through government guarantees, monetizing assets and the administrative allocation of included spectrum for the provision of 4G services across India.
Earlier this month, Minister of State for Communications Devusinh Chauhan told the Rajya Sabha that the merger of the state telecom operators had been postponed due to financial reasons, including MTNL’s high level of debt. Additionally, he said there was no proposal to divest the two public sector companies (PSUs).
Special features of the 2019 package
amalgamation: Former Minister of State for Communications Sanjay Dhotre had said in Lok Sabha in 2020 that a merger would help the companies gain a presence across India, create synergies in operations, reduce fixed costs and overheads, conditions for sharing the create technical infrastructure and improve corporate business.
“With MTNL operating in the metropolitan areas of Delhi and Mumbai and BSNL operating in the rest of India, the merger will help strengthen Pan-India presence and operational synergies,” then-Communications Minister Ravi Shankar Prasad had previously said in Rajya Sabha.
The merger should be completed in 18 to 24 months.
Assign Spectrum: The move aimed to enable PSUs to provide high-speed broadband and other data services across the country, become competitive and boost their average revenue per user (ARPU). The spectrum was funded by the central government with a capital injection of Rs 20,140 crore. In addition, the accruing GST of Rs 3,674 crore related to spectrum was also borne by the center.
The US-based CTIA explains that spectrums are the invisible radio frequencies on which wireless signals travel, facilitating phone calls and internet use. Depending on their capacity and ability to travel distances, they are categorized under “Bands”.
Currently, BSNL and MTNL together hold 116 MHz of spectrum in the 900 MHz band, 6 MHz in the 1800 MHz band, 110 MHz of spectrum in the 2100 MHz band, and 280 MHz of spectrum in the 2500 MHz band. The figures were presented by Mr Chauhan in Rajya Sabha earlier this month.
Number of Base Transceiver Stations (BTSs) from BSNL and other operators. BTS send and receive radio signals from mobile devices, convert them into digital signals and forward them to other end devices in the network or the Internet. Source for table: Response from MoS Communications Devusinh Chauhan in Rajya Sabha of February 11, 2022
Personnel cost reduction: The 2019 package offered all telecom operators’ employees aged 50 and over voluntary retirement under the Voluntary Retirement Scheme (VRS). According to the Government’s release through the Press Information Bureau (PIB), the voluntary component of the program required an additional Rs 17,169 crore. It was informed that the center would bear the cost of pensions, bonuses and severance payments.
In March 2020, the House of Lords was informed that 78,569 employees of BSNL and 14,387 employees of MTNL had taken VRS.
Separately, according to the ministry’s statement, a year after the implementation of the revitalization package in January 2021, there was a sharp drop in labor costs due to VRS, with almost 50% of BSNL and 75% of MTNL staff being cut.
Monetize assets: This was aimed at raising resources to service debt, modernize the network, expand, service bonds and meet operational financing needs. MTNL identified 52 properties with a preliminary value of Rs 22,581 crore while BSNL identified 20 properties with a preliminary value of Rs 24,980 crore for monetization. The figures were presented by Mr. Dhotre in Rajya Sabha in 2020.
The Dept of Investment and Public Asset Management (DIPAM), which facilitates the entire asset monetization process, states that many public sector assets are under-utilized and could be adequately monetized to provide greater financial leverage and value to the companies and the in-market they invested state equity to achieve . It aims to “create previously unexplored revenue streams for the company and its shareholders and contribute to a more accurate estimate of public wealth, which over time would contribute to better financial management of government/public resources.”
The current Minister of State for Communications, Devusinh Chauhan, informed the House of Lords earlier this month that DIPAM had approved the phase 1 monetization of six land and building complexes of MTNL with an interim value of Rs 5,158 crore. He added that International Property Consultants (IPCs) have been appointed for this. Of the six properties, two had been taken up for e-auction at a reserved price of Rs 290 crores.
rescheduling: The proposal said the two PSUs would issue long-term bonds of Rs 15,000 crore, which the center would provide a government guarantee for. Using the same, the two companies would restructure their existing debt and also partially cover their capital expenditures, operating expenses and other requirements.
“BSNL and MTNL have been very successful in raising money through the bond route. MTNL’s recent bond offering drew more than three subscriptions for the issue and more than two subscriptions for BSNL,” the Communications Ministry said in January 2021.
Where are we now?
As of December 31, BSNL had approximately 12.2 million phone subscribers, while MTNL had more than 60.1 million phone subscribers, according to figures from Rajya Sabha. BSNL’s market share among telephone subscribers on the same day was 10.15%. By segment, the market share was 9.69% for wireless subscriptions, 32.48% for wired subscriptions and 2.93% for broadband.
Net increase in BSNL subscribers. Source: Response from MoS Communications Devusinh Chauhan in Rajya Sabha
The Dept of Telecommunications (DoT) had classified BSNL as “beginning sick” in September 2017. It has been losing ground since 2009/10. The center said in January 2021 that both companies had posted positive EBITDA (earnings before interest, taxes, depreciation and amortization) for the first six months of this fiscal year. BSNL EBITDA increased to positive Rs 602 crore in the mentioned period from negative Rs 3,596 crore in the half year ended September 2019. MTNL’s EBITDA increased to positive Rs 276 crore in the mentioned period compared to negative Rs 549 crore in the same period.
BSNL reduced its losses from Rs 15,500 crore in 2019-20 to Rs 7,441 crore in 2020-21. Total expenditure was Rs. 26,036 crore while 2020-21 revenue was Rs. 18,595 crore. The figures were presented in Rajya Sabha earlier this month.
Total revenue and expenditure of BSNL and MTNL since 2017. MoS Communications Devusinh Chauhan’s response in Rajya Sabha of April 1, 2022
The total revenue of MTNL was Rs 1,788 crore. His total expenses amounted to Rs 4,243 crore.
