BSNL, MTNL revival, spectrum auction top on new govt's agenda

Revival of ailing telecom public sector firms, 5G technology trials and a new round of spectrum auction will be among the top priorities for the new government.

Some of the crucial decisions have been pending owing to the general elections for the past few months. Department of Telecommunications officials said a Cabinet note on the revival plan of BSNL and MTNL, which are facing liquidity crunch amidst rising employee costs, has already been prepared and is expected to be taken up on a fast-track basis.

The DoT is also preparing a 100-day agenda note for the new government which will clearly specify the topmost priorities.

Another key decision which needs quick approval is the grant of licence for 5G trials. The government has been moving fast for adoption of new 5G technology and it is expected that the commercial rollout of 5G will start in 2020.

A decision on allowing Chinese network player Huawei in 5G trials is also pending.

In this context, the government is planning spectrum auction in the second half of the current fiscal. Though, the telecom industry, mainly incumbents Bharti Airtel and Vodafone Idea have been asking the government to not conduct auctions for another year given their financial constraints. 

The industry expects the government to take some steps to relieve the financial burden. Cellular Operators Association of India Director General Rajan Mathews says the government needs to rationalise various levels of taxes on the industry, which will be a big relief. “A rationalisation of taxes and levies which stands at around 25-33% will be a much-needed support for the sector to survive. This was also highlighted in the new digital communications policy.”

BSNL is awaiting an approval for its land asset monetisation, a voluntary retirement scheme (VRS) for both BSNL and MTNL and allotment of 4G spectrum are the key part of revival plans. Both the PSUs have been incurring losses since 2009-10. Due to hyper-competition and huge employee costs, the expenditure of both firms has hit the roof while revenues have nosedived. For BSNL about 55% of its expenditure goes into employee salaries as it has a huge base of 1.76 lakh employees across India. For MTNL, the expenditure on employees is around 99%. A VRS proposal for Rs 6365 crore for BSNL and around Rs 2120 crore for MTNL was given to the government for consideration. Also, both the firms have asked for allotment of 4G spectrum without paying auction price.

The cumulative debt of the industry stands at around Rs 7 lakh crore. Since the entry of new player Reliance Jio in the sector, the financials of incumbents have nosedived and many players have exited the sector, while some have filed for bankruptcy and two biggest players Vodafone India and Idea Cellular have merged. Continuous investment in their networks has become difficult for Airtel as well Vodafone Idea, which is still in the process of integrating the two networks. Vodafone Idea has recently raised funds from a rights issue while Airtel is in the midst of raising funds.