Cash bailout alone can’t help BSNL
Loss-making state-run telco BSNL got another shot at life with the government’s Rs 1.64 lakh crore bailout package. The four-year turnaround plan includes a cash component of Rs 44,000 crore and a non-cash component of Rs 1.2 lakh crore, which together will help upgrade the operator’s network to 4G and de-stress its balance sheet. Nearly 70% of the support will come through in the next 1–2 years, showing the need and urgency to revive the ailing telco. First, the government will expedite 900/1800 MHz spectrum allocation, fund 4G deployment and revive existing unviable rural wireline operations. Lastly, both BSNL and MTNL will get a sovereign guarantee to raise long-term loans of Rs 40,399 crore, while for BSNL, AGR dues will see an equity swap to improve balance sheet strength. All these efforts should help BSNL turn a corner by FY27, nearly two decades after it was last profitable in FY09.
It’s pertinent to note that BSNL’s first Rs 70,000 crore bailout package in 2019 didn’t deliver. Though it addressed the excess workforce issue, reducing losses by half and total expenditure by 24%, it’s the other and most crucial part of the package that didn’t yield. In 2019, the government had provided Rs 24,000 crore for 4G services, but BSNL wasn’t technology-ready, which led to declining revenues. Even today, it lacks 4G connectivity on a pan-India basis—a decade after 4G services first began and just when competitors are moving towards 5G. Worse, BSNL even surrendered unutilised 2G spectrum last year in the 900/1800 MHz bands, where most operators have subscribers.
Agreed, BSNL has a distinctive presence in far-flung areas, improving rural teledensity considered unviable by private operators. But profits from a social objective are always slim, meaning BSNL needs autonomy and separation from bureaucracy to take commercial decisions for the wireless and broadband segment, where its market share is a pitiful 9.7% and 2.9%, respectively. Both BSNL’s topline and subscriber base aren’t improving, and the government may have to keep bailing it out unless revenues increase.