DNA Money Edit: Should govt revive BSNL, MTNL?

A revival package for ailing telecom PSUs BSNL and MTNL is on the cards. But will such a huge package at the cost of taxpayers' money be a good bet for sick PSUs? Experts are divided. Both the telecom firms have not been able to adapt to a professional style of working and change with the advent of new technologies.

The PSUs have a marginal market share in the mobile segment owing to lack of 4G spectrum. Both the firms have been asking for allotment of the 4G spectrum without paying the auction price as they are unable to compete with private telecom players which are rapidly expanding their 4G network and services.

Allotment of the 4G spectrum is part of revival package, which also has other key proposals including an early retirement of staff, capital infusion and monetisation of assets to keep them afloat in a highly competitive market.

The biggest problem is the huge number of employees. About 60% of BSNL's revenues go towards managing employee expenses, while for MTNL it is around 87%. Currently, BSNL has 1.65 lakh employees while MTNL has 21,679.

Due to hyper-competition in the telecom sector, the revenues are on a downward spiral while employee costs are increasing. Both telecom PSUs have been incurring losses for many years.

The new player Reliance Jio, which shook the telecom industry with its disruptive pricing, has a pan-India 4G network. The data consumption on mobile devices has gone up substantially since the advent of 4G in late 2016 with Reliance Jio. The data consumption on mobiles grew substantially, the financials of the incumbents took a hit after the debut of RJio, which also led to consolidation in the telecom sector. Now, only three private players are left apart from the two telecom PSUs, BSNL and MTNL. Only time can tell if a revival package can change the fortunes of BSNL and MTNL.