BSNL gets $11 billion bailout to facilitate 5G

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The Indian government has approved a third revival package for troubled BSNL worth a total of almost US$11 billion that mainly involves the allocation of spectrum for 4G and 5G mobile services.

The Union Cabinet shared details of the 890.47 billion-rupee ($10.8 billion) package, which it claims will see BSNL emerge as “a stable telecom service provider focused on providing connectivity to remotest parts of India.”

If it feels like we have heard that somewhere before, that’s probably because India has been crafting revival plans for the state-owned incumbent for a number of years; its first was approved back in 2019. But this time the package specifically paves the way for the telco to roll out new generation mobile services, something that should lay the foundation for a much stronger mobile business.

As it stands, BSNL’s financials do not look as dire as we might have predicted. The operator recently posted a headline-grabbing $1 billion loss for the financial year to the end of March, but revenues are growing, particularly in mobile, and its cellular customer base and market share are relatively stable, despite the fact that it has yet to launch 4G services. Meanwhile, its privately-owned rivals are battling it out for 5G dominance or, in the case of Vodafone Idea, shrugging off questions about exactly when it might bring 5G to market.

Speaking of whom, you could argue that Vodafone Idea – or Vi, as it is now better known – is as much in need of a bailout as BSNL, its effective takeover by the government having done little to revive its fortunes in the short term. But that’s probably a story for another day. With BSNL it has a homegrown operator using homegrown technology, which is a much more attractive prospect.

The new BSNL revival plan includes the allotment of 4G/5G spectrum for BSNL through equity infusion, the government said, noting that the telco’s authorised capital will be increase to INR2.1 trillion ($25 billion) from INR1.5 trillion.

Spectrum makes up most of the package, particularly airwaves in the 700 MHz and 3.3 GHz bands, which account for INR463.4 billion and INR261.8 billion respectively (see chart). The rest is comprised of 2.5 GHz and 26 GHz, plus miscellaneous items.

“With this spectrum allotment, BSNL will be able to: provide pan India 4G and 5G services; provide 4G coverage in rural and uncovered villages under various connectivity projects; provide Fixed Wireless Access (FWA) services for high-speed internet; [and] provide services/spectrum for Captive Non-Public Network (CNPN),” the government said.

It would not be safe to bet on this revival plan being BSNL’s last, given the company’s history, but it surely stands a chance of competing better with its bigger rivals if it can get 4G and 5G services to market. The announcement comes just weeks after BSNL inked an INR150 billion order with a consortium led by Tata Consultancy Services for the rollout of a nationwide 4G network, as reported by Light Reading, so such a move finally looks promising after years of delay.

The government still insists that its first revival plan for BSNL and sister company MTNL – a INR690 billion scheme approved four years ago – “brought stability” to the operators, while a second INR1.64 trillion package in 2022 was about financial support for capex, destressing the balance sheet, and the settlement of AGR dues, amongst other things, as well as being designed to bring about the merger of the two telcos.

We’re still waiting on that last point. And it’s starting to look like the government is backing away from a merger in favour of closing down MTNL altogether.

Various Indian press reports this week, including one from Mint, cited unnamed sources as saying that the state is seriously considering shuttering MTNL and transferring its staff and operations to BSNL.

While that might look like a merger in everything but name, the crucial issue here is debt. MTNL has close to INR400 billion of debt on its books, which would be transferred to a formally merged entity, pushing that into the red and making a revival very difficult, one source explained.

The potential merger of BSNL and MTNL has been under discussion for years, if not decades, so a quick resolution is probably unlikely. But in the meantime, at least BSNL should have access to the spectrum it needs to drive its mobile business forward.

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  1. Avatar stanley 10/06/2023 @ 3:56 pm

    Who is responsible for BSNL running into losses?
    Why didn’t the government upgrade BSNL to 4G services earlier, they gave permission to private players to upgrade to 4G and 5G but BSNL still in 3G in many circles even today.

  2. Avatar stanley 10/06/2023 @ 4:04 pm

    BSNL is a PSU ie made with the tax payers money to provide employment for the people and produce wealth for the country.

    In countries like Singapore the PSUs make so much profit that citizens pay less taxes and there’s wealth for development. In India due to poor administration and management PSUs run into losses of crores of rupees. The performance of the PSUs reflects the performance of the government.

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