Lifeline for MTNL and BSNL as Cabinet approves Rs 11,258 cr 4G refund to be used as revival package

IN A big boost for beleaguered telcos Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), Union government on Thursday approved a proposal to refund Rs 11,258 crore to them. The two PSUs will return the broadband wireless access (BWA) spectrum they got in 2010. BSNL and MTNL had earlier asked for a refund of the entire amount paid for the BWA spectrum it had not used. The refund is likely to help improve the balance sheets of the telcos in a big way. The refund will be made to ensure support for the...

revival and revitalisation of BSNL and MTNL. The department of telecommunications (DoT) had proposed the refund, saying that the payment had adversely impacted the cash reserves of both the companies. BSNL had paid Rs 6,724.51 crore whereas MTNL had to pay Rs 4,533.91 crore. Thanks to this plus some other reasons, both had together incurred a loss of Rs 39,314 crore (BSNL Rs 24,681 crore and MTNL Rs 14,633 crore) at the end of March 2013.

Briefing media after the Cabinet meeting, information and broadcasting minister Manish Tewari said, “The money will be refunded over a period of time as part of the revival package, as both the companies are passing through difficult times.” It shall also help these PSUs to arrange finances to meet basic financial commitments such as operation and maintenance of their telecom network. BSNL and MTNL had decided to surrender the BWA spectrum, used for fourth generation (4G) or long-term evolution (LTE) services, at a time when the telecom industry was gearing up for data-driven 4G or LTE services.

The six Licensed Service Areas of BSNL are Gujarat, Maharashtra, Andhra Pradesh, Karnataka, Tamil Nadu and Kolkata. It may be recalled that BSNL has been incurring losses since 2009-10. BSNL’s profits started dipping after 2004-05, when it had made net gains of Rs 10,183 crore. Its losses stood at Rs 8,198 crore for 2012-13 against Rs 8,851 crore in 2011-12. Likewise, in 2012-13, MTNL recorded a net loss of Rs 5,321.12 crore on annual revenue of Rs 3,428.6 crore. The last time MTNL made a profit was in 2008-09, when it posted a net of Rs 205.9 crore on revenue of Rs 4,496.2 crore. After reporting widening of losses for nine quarters in a row, MTNL reported narrowing of its standalone net loss to Rs 947 crore for the July-September 2013.

Both BSNL and MTNL have a number of state-mandated social obligations to fulfil. Government interference in the functioning of the PSUs is another reason for its dwindling profits. Moreover, MTNL’s 42,000-employee workforce is three times its required strength. To cut staff, MTNL estimates it will have to spend about Rs 5,000 crore on a voluntary retirement scheme (VRS), making it the biggest such plan that the telco has offered. The current staff cost is around Rs 4,000 crore, including retirement benefits. On the other hand, Bharti Airtel, India’s largest telecom services provider, has less than 18,000 employees across the country and outsources several functions.