STOCK MARKET BSE NSE

Arduous road ahead for ailing public sector telecom firms BSNL, MTNL

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.

Published: 25th October 2019 08:14 AM  |   Last Updated: 25th October 2019 08:14 AM   |  A+A-

BSNL

For representational purposes (File Photo | PTI)

Express News Service

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.

ALSO READ| Supreme Court orders Telecom companies to clear dues worth Rs 92,000 crore

“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. 

ALSO READ| BSNL and MTNL get a lifeline with merger

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.



Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp