News & Analysis

Govt. Doles Out Rs.1.64 Lakh Crore Package to BSNL

The question is how relevant would BSNL be post the revival in a world where 5G is the name of the game?

India’s much-delayed 5G spectrum auction saw bids worth Rs.1.49 Lakh Crore, a figure which the government hopes would increase by the time the exercise ends later this evening. However, what was even more surprising was the announcement that the government was doling out Rs.1.64 lakh crore to the debt-ridden state-owned BSNL. 

The immediate question that sprung to our minds is, was the government planning to use all the spectrum money on a company that’s been on life support for sometime? Also, were there any specific reasons the government wanted BSNL to stop struggling and revive itself? And if they do manage to do so, how would they match up with the likes of Reliance Jio and Airtel? 


What the government says

According to an official release, the package comprises three main elements, viz., improving service quality, de-stressing the balance sheet and expanding the company’s fiber optics reach through a merger with Bharat Broadband Network Limited. The package includes cash support of Rs.43,964 crore and non-cash assistance of Rs.1.2 lakh crore. 

The revival program would be for a period of four years though union minister for telecom Ashwini Vaishnaw thinks most of the activity would get completed within two years. The cash part of the transaction would be utilized for spectrum allocation, capital expenditure and for funding viability gaps. 

“To improve existing services and provide 4G services, BSNL will be allotted Spectrum in 900/1800 MHz band administratively at the cost of Rs 44,993 crore through equity infusion. With this spectrum, BSNL will be able to compete in the market and provide high speed data using their vast network including in rural areas,” an official release said. 


Are these huge spends justified though?

Which brings us to the crucial question. Why have a senile and lumbering entity compete with young and highly agile enterprises that mean business? At first glance, the entire idea appears to be a backward step, but all it takes is a closer inspection to realize the merit of the action. 

Minister Vaishnaw said using the funds, BSNL would be able to expand its 4G services to more than 120,000 sites, making it an important source of revenue. In addition, this expansion would bring in about 100,000 new jobs, a feather that this regime would be eager to pin to its cap given the accusations of job losses. 

Then there is also the small matter of digitizing the undigitized that this government has taken up via the Open Network for Digital Commerce (ONDC). The success of this endeavor relies heavily on the ability of the undigitized to get affordable 4G connection across every nook and cranny of the country and that’s precisely what BSNL could end up doing. 


This one could be a masterstroke!

As on May 31, 2022, the private telecom service providers held 89.8% of the wireless market with BSNL and MTNL holding the remaining 10.2%. The merger of Bharat Broadband will be the first step towards wider utilization of the BharatNet infrastructure. The new entity would boast around 14 lakh kms of fiber network, which would put them as leaders in the rural economy. 

The minister also said that post the revival package, BSNL would actually be able to expand its 4G services to raise average revenue per user to the Rs.170-Rs.180 mark. He also revealed that the administrative allocation of both 4G and 5G services BSNL is a done deal as it already stands approved by the Union Cabinet. 

With the rollout of 4G services within the next two years, BSNL could once again prove to be a tough competitor to the big players who seem to be splurging money on 5G auctions. Suffice to say that individual phone users may continue to use 4G services while it may be the corporate world that  plugs into 5G networks, given the higher cost of the latter. 

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