Latest BSNL bailout worth US$20 billion

The Indian government has approved a US$20 billion turnaround package for state-owned operator BSNL which includes a merger with Bharat Broadband Nigam Limited.

The revival plan, announced by the Union Cabinet this week, comes after well over a decade of debate over the future of the telco. BSNL, or Bharat Sanchar Nigam Ltd, to give it its full title, has for years struggled to keep pace with its privately-owned rivals, triggering endless discussion over its ability to continue as a standalone player, or indeed at all.

The telco has consistently failed to boost its position in the mobile market and to stem the declines at its fixed business, putting its finances under considerable pressure. Consolidation in the mobile market, that saw a raft of new competition reduced to just three main private players, has not helped matters; as the competition has built scale, BSNL has lost it.

Market disruptor Reliance Jio is close to stealing BSNL’s fixed-line market leader crown, clocking up a 26.7% market share at the end of May to the incumbent’s 28.7%; ten years earlier, in May 2012, BSNL had 69% of the market, sister company MTNL and then mobile market leader Bharti Airtel each had between 10% and 11%, while Jio was as yet unheard of. BSNL’s share of the mobile market has remained at around the 10% mark for the past ten years or so, but once it could claim around a quarter of India’s mobile users.

All of which illustrates at least in part why the government is now taking action to help the operator, approving a revival plan that amounts to 1.64 trillion rupees (US$20.5 billion).

“Revival measures approved by the Cabinet focus on infusing fresh capital for upgrading BSNL services, allocating spectrum, de-stressing its balance sheet, and augmenting its fiber network by merging Bharat Broadband Nigam Limited (BBNL) with BSNL,” the Cabinet said in a statement on Wednesday.

A key tenet of the plan will see BSNL awarded almost INR500 billion worth of spectrum in the 900 MHz and 1800 MHz bands, a move the state says will help it to improve its existing mobile services and offer 4G services. While that is doubtless a shot in the arm to the telco, its hard to ignore the fact that this plan was approved in the same week that India is carrying out its long-awaited 5G auction.

As Light Reading reports, there are four players battling it out for 72 GHz of spectrum in the low, mid-range and high bands: Reliance Jio, Vodafone Idea, Bharti Airtel and Adani Group, the last being there to acquire frequencies to enable it to get into the private 5G space. Troubled BSNL is, of course, not on the list. That spectrum sale could draw to a close before the week is out, but for now, the BSNL revival is the focus of attention in the market.

The plan will also see the government hand over INR224.7 billion to fund mobile capex over the next four years, with a particular focus on villages without 4G coverage. It will also provide INR137.9 billion in what it terms “viability gap funding” for wireline services BSNL has rolled out in recent years in commercially unviable areas.

As well as an increase in authorised capital, a debt restructuring, and other measures, the government has agreed to convert INR334 billion in AGR dues into equity, giving BSNL’s balance sheet a further boost.

And there’s the BBNL merger, which will give the incumbent a swathe of new fibre network assets.

This package is BSNL’s second bailout in less than three years. Given that the first arguably failed – the merger with MTNL proposed back in October 2019 has since been shelved on financial grounds, mainly MTNL’s sizeable debt burden – there will certainly be some scepticism over this latest move. But the government seems confident.

“With these measures, BSNL will be able to improve the quality of existing services, roll out 4G services and become financially viable,” the government said. “It is expected that with the implementation of this revival plan, BSNL will turn-around and earn profit in FY 2026-27.”

Ultimately, the operator’s P&L will show whether this package is successful or not.

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