Government bets big on BSNL with $10.79 bn revival package

telecom, BSNL
The BSNL revival package seeks to revive the struggling telecom operator by the bridging technological gap and enhancing security.

The government has approved a revival package worth $10.79 billion for BSNL to save the beleaguered telecom company. The state-run BSNL is expected to use this corpus for rolling out its 4G and 5G services. The market is currently dominated by private players — Mukesh Ambani-owned Reliance Jio, and Bharti Group-owned Airtel. The government expects the public sector firm to emerge as a stable service provider in India’s fiercely competitive telecom market. The government plans to make BSNL profitable by FY2026-27 through this infusion.

In 2019, the government had allocated a package worth Rs 70,000 crore for BSNL and MTNL. Three years later, the government approved an even larger package of Rs 1.64 lakh crore to revive BSNL. According to government data, the combination of these two packages has helped BSNL achieve operating profits since FY 2021-22, while reducing the total loss from Rs 32,944 crore to Rs 22,289 crore.

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The government has now raised the authorised capital of BSNL from Rs 1,50,000 crore to Rs 2,10,000 crore. What sets the current revival effort for BSNL apart is the government’s support as well as the strong backing by Tata Consultancy Services, a leading private firm. BSNL is collaborating with Tata Consultancy Services to deploy 4G networks nationwide at a time when larger players in the market are introducing the next-generation 5G networks.

BSNL’s gradual decline

Indians from the older generations will recall the time when BSNL was synonymous with telecom services. However, the entry of private players, Reliance Jio being the latest, disrupted the market. The advent of Jio affected BSNL as well other private players which were compelled to significantly reduce their prices in response to Jio’s extremely low-cost offerings. While competitors were embracing 4G technology, BSNL did not have a live 4G network across the country. Even when India recently celebrated the launch of 5G by private players, the state-run telecom still lacked a 4G core. The absence of 4G capabilities had contributed to BSNL’s downfall.

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The debt-laden BSNL, struggling with poor infrastructure, has been incurring losses for over a decade. The losses have decreased from Rs 74.41 billion in the previous year to Rs 69.82 billion in the fiscal year ending in March 2022.

Importance of saving BSNL

BSNL is viewed as an investment to ensure competition from the government’s perspective. It also serves as a sandbox for the government’s indigenisation initiatives in the telecom network domain. Saving BSNL is crucial to foster healthy competition in the telecommunications sector, which is at risk of becoming a duopoly following Reliance Jio’s entry into the market. Thus, injecting additional competition seems to have its merits.

While it is true that the public sector has its share of problems and the telecom sector relies on private players, the necessity of a state-run operator should not be undermined. Among the reasons the government seeks to keep BSNL afloat are security considerations. As the country becomes increasingly digital and faces mounting security threats in the digital space, the government can utilise BSNL to address its own high-priority and high-security communication requirements directly.

Additionally, despite the tremendous advancements made by private players in revolutionising the telecom sector, there are still economically unviable, remote, rural areas that have yet to benefit from technology. The government cannot focus solely on commercial enterprises and must cater to such neglected areas that lack technological advancements. Players like BSNL can bridge this gap and serve as an instrument to fulfil not only financial needs but also welfare requirements. BSNL’s partnership with TCS exemplifies this.

BSNL’s revival strategy revolves around obtaining additional capital, implementing new policies, and expanding its service offerings. Currently, the telco controls less than one-tenth of the market, significantly lower than Reliance Jio’s 38.5% and Airtel’s 35.5%. With the latest package, BSNL wants to achieve a 15-20% market share within the next three years. The investment will also position the telecom firm as a credible third player in the market.