NEW DELHI: Wednesday’s Cabinet decision to mount a revival effort for ailing state-run telecos BSNL and MTNL might have allayed concerns in the anti-privatisation camp, but industry experts say success is by no means certain and would certainly require more fiscal support from the exchequer.
The government has decided to merge the two firms and implement other relief measures including asset monetisation, capital infusion, 4G spectrum allocation and a highly-needed VRS scheme for the bloated telecos. "The road to self sustainability is long, uncertain and arduous, and requires further government support," said JM Financial analysts Sanjay Chawla and Vishnu KG.
“While the government has attempted to balance strategic interests (existence of a state-owned telco, for now) and political considerations (employees and unions), while minimising cost to taxpayers, we do not rule out the need for further financial support to pull out BSNL/MTNL from their current moribund state,” they added.
The problem is the financial condition of both the firms. According to Kotak Institutional Securities, the PSUs have not escaped the disruption triggered by the low-tariffs offered by Reliance Jio, with industry revenues tanking 30 per cent since its entry in 2016. “Sticky employee costs have meant little scope for cost rationalisation,” said Kotak analysts.
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Both firms have racked up continuous losses accumulating to about Rs 90,000 crore currently. Last fiscal, BSNL posted a Rs 14,200 crore net loss, MTNL saw losses widen to 3,400 crore. Analysts said the government’s decision is a gutsy one, considering the difficulty of mapping out and effecting a revival, unless the Thursday’s Supreme Court judgement upholding the Centre’s claims for AGR dues worth Rs 92,000 crore from the telecom sector manages to sink one of BSNL-MTNL’s private sector peers.
"This is a realistic scenario... Both Bharti and Vodafone Idea are looking at hefty payouts. As an aside, these payouts could fund the announced revival package and another two, perhaps, should the need arise!" Kotak observed.