The story so far: To spur Bharat Sanchar Nigam Limited’s (BSNL) overall competitiveness in the steep domestic telecom market and de-stress its balance sheet, the Union Cabinet on Wednesday approved yet another revival package worth ₹1.64 lakh crore. The second reform package after 2019 is meant to be utilised over the next four years. The revival package would initiate measures on three fronts, namely, infusing fresh capital for upgrading the state-owned operator’s services, strengthening its stressed balance sheet and augmenting its fibre network by merging Bharat Broadband Nigam Limited (BBNL) and BSNL. It is expected that the package could help with a turnaround in such a manner that BSNL starts earning profits in FY2026-27. 

How does the latest package propose to help? 

The package has three broad components. Starting with the endeavour to upscale its services, BSNL would be allocated spectrum in 900/1800 MHz band administratively at the cost of ₹44,993 crore via equity infusion. Spectrum can be defined as invisible radio frequencies on which wireless signals travel, facilitating phone calls and internet usage. To put it simply, the allocation would help BSNL increase as well as consolidate its serviceable bandwidth. Thus, it would be able to provide high speed data utilising a vaster network presence, more importantly, in rural areas. Other than spectrum, in order to pursue its social objectives, the Government would provision ₹13,789 crore to the company to fund its operational viability gap in the commercially unviable rural wireline operations that it had undertaken between 2014-15 and 2019-20. 

Additionally, the Government would also be increasing the authorised capital from ₹40,000 crore to ₹1.50 lakh crore in lieu of its adjusted gross revenue (AGR) dues, provision of capital expenditure and allotment of spectrum. The AGR refers to the fee-sharing mechanism that computes the share in revenues that the telecom service providers (TSPs) are required to pay the government as annual licence fee and spectrum usage charges. 

What was the 2019 package? 

Among the more import features of the package was the proposed merger of Mahanagar Telecom Nigam Ltd (MTNL) and BSNL. It was argued that since the BSNL reaches out to populations in rural areas and MTNL is based in the metro cities of Mumbai and Delhi, combining their synergies would help acquire a pan-India footprint. It was informed in April this year that the merger had been delayed owing to financial reasons, including the high debt of MTNL. 

For helping spur operations, the Government had announced a capital infusion of ₹20,140 crore for acquiring spectrum. The overall package which was for MTNL and BSNL combined, paved the way for the two PSUs to raise long term-bonds for which the Centre provided sovereign guarantee.

How is BSNL placed in comparison to its peers? 

An essential metric to assess the health of telecom service providers is ARPU, that is, average revenue per user. BSNL’s social sector duties prompt that all loss on capital assets is met from internal accruals only. Thus, it is unable to promptly respond to technological innovations in the market like its private peers, say a rapid transition from 4G to 5G. Thus, its ARPU suffers and impacts the bouquet of services. On the other hand, Bharti Airtel’s ARPU in the March-end quarter increased about 23%, while Reliance Jio’s ARPU increased 27% on a year-on-year basis. 

A perusal of the Telecom Regulatory Authority of India’s (TRAI) monthly subscriber data between the end of April and May shows that BSNL lost wireless subscribers at an average 0.30% each month during the period, whereas Bharti Airtel and Reliance Jio combined had acquired wireless subscribers at an average 0.43% each month.

There is also a difference in the number of Base Transceiver Stations (BTSs) held by the three companies. BTS is an equipment that sends and receives radio signals from mobile devices and routes them to other terminals in the network. As per figures laid out in the Rajya Sabha in February, Reliance Jio and Bharti Airtel held six and five-and-half times more BTSs, respectively, when compared with BSNL. 

What makes the industry so competitive? Is there an untapped opportunity? 

As per the National Investment Promotion and Facilitation Agency, India’s telecom industry is the second-largest in the world. The country’s overall tele-density is 84.88%. However, there exists a divide between rural and urban areas. While the urban market’s tele-density in 134.70%, the rural market is largely untapped at about 58.2%. However, at the end of May, both Reliance Jio and Bharti Airtel had almost five times more subscribers in rural areas compared with BSNL.