- The two companies will be merged
- There would be Rs 15,000 crore bond issue
- The telco will also be administratively allocated 4G spectrum
- The companies will also monetise their assets
Bharat Sanchar Nigam Limited (BSNL) was neck-deep in financial troubles since the last few years. The troubles became even more detrimental as Reliance Jio made its entry to the Indian telecom industry and bruised the sector with the data tariff war, thus hurting the financials of other telecom operators severely including BSNL. However, out of all the telecom operators, BSNL was the most in trouble with heavy debts and payments pending to vendors and its other operational creditors. On top of that, the telco was also dealing with a high churn rate of subscribers, falling revenue, and very high salaries to the employees. With all of this bringing down the financial sheets of BSNL, it was getting hard for the telecom operator to compete in the industry with the private telcos. But, now the government has brought forth a revival package for BSNL which includes VRS, 4G spectrum allocation and more and this is how it will help the ailing telecom company.
BSNL Will First Solve its Cash Problem
As per the decision granted by the Union Cabinet on the fate of BSNL, the government has decided that it would invest a total of Rs 23,937 crore in this revival plan. Not only this, but the companies would be raising sovereigns bonds worth Rs 15,000 crore which would help it in getting its operations back on track. BSNL has a massive debt on its shoulders, which it will need to pare off, in addition to paying off its vendors which have been circling for their pending payments. Another way BSNL will bring cash on the table for its operations would be by monetising its land and fibre assets. Since the two companies would be merged, then the combined assets of BSNL and MTNL worth Rs 38,000 crore would be monetised by the merged entity to raise more capital.
Voluntary Retirement Scheme for Employees
Another major problem that BSNL and MTNL were facing in their operations was the amount of salary which the two companies were giving out. As compared to other telecom operators, who spend 7% to 8% of their revenue in salaries to their employees, BSNL currently shells out more than 70% of its revenue to pay salaries to its 1.75 lakh strong workforce. Now to reduce this cost, BSNL would be giving, Voluntary Retirement Scheme or VRS with attractive benefits to a chunk of its employees. BSNL would be handing out VRS to 60,000 to 70,000 employees so that the costs being gone salaries come down.
4G Spectrum Allocation
Another major point of drawback which BSNL had until now was its lack of 4G network. While the other private telecom operators in the country moved on ahead and deployed 4G network on their respective spectrum, BSNL was left behind as it had to airwaves to deploy a 4G network. This was also one of the reasons of BSNL’s fast decline when the data tariff war started, while the other incumbents had a chance to fight Reliance Jio courtesy of their 4G network, BSNL did not even have the opportunity to do that. Now the government would be providing BSNL with administratively allocated 4G spectrum which the telco would be able to deploy to provide fast internet and other 4G services like VoLTE.
BSNL and MTNL Merger
As per Telecom Minister Ravi Shankar Prasad, MTNL would be a subsidiary of BSNL after the merger. Now, although the merger of BSNL and MTNL has been in talks since a decade, it hasn’t been able to take proper form. But, finally, the cabinet has given it a nod.
All of these measures would help the government led ailing telecom operators in dealing with the competition from private players, and it would also help them in establishing a better stronghold in the market. This year, BSNL has made losses of Rs 14,000 crore, and it is relying on 3G services with 4G services in only very selective areas.
Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.