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India proposes new rescue plan for state-owned telcos

Successive Indian governments have toyed with proposals to breathe new life into the two state-owned operators, BSNL and MTNL. Plans from break-ups to public offerings to mergers have been mooted but none has been implemented and the companies continue to lag behind their rapidly consolidating private competitors, led by Vodafone Idea, Bharti Airtel and Reliance Jio.

The latest idea is a revival package worth about $10bn which would aim to reduce staff and costs and enable the operators to expand their mobile broadband coverage and capacity. The proposals include a voluntary retirement scheme (VRS) for employees, a reduced retirement age (from 60 to 58), and the allocation of additional 4G spectrum, worth INR200bn ($2.91bn), to BSNL plus up to INR130bn ($1.89bn) in financial aid to support 4G expansion.

That would give the two operators an improved network on which to provide a viable alternative to the big three MNOs. Currently, the capacity and quality of service on their networks are poor, which is driving customers to the private networks, and they have not been allocated 4G spectrum (except for some legacy broadband wireless airwaves, previously used for WiMAX).

However, it is questionable whether the latest proposals would be enough to save the two state operators (MTNL has licences in the two largest cities, Delhi and Mumbai, while BSNL operates everywhere else). BSNL recorded a loss of INR138bn ($2bn) in its last fiscal year, while MTNL’s loss was about INR34bn ($495m). The larger operator has been in local news recently for delaying salary payments as well as payments to suppliers.

The proposals for redundancy and retirement programs are designed to cut BSNL’s huge workforce costs. As of the end of March, the telco had 163,092 employees, including 46,597 executives, according to LightReading, and salary payments were INR144.9m ($2.1bn) in the last fiscal year – 75% of BSNL’s operating costs. MTNL has 45,000 employees to serve its two markets.

Trade unions will oppose many of the plans, and even if the two telcos received 4G spectrum tomorrow, they would have a huge job to catch up with the three leaders in network build-out, service launch and brand acceptance. However, sacrificing the national telcos completely is not seen as an option because BSNL, in particular, is important for connecting rural users and may  be leveraged better, in future, to enable government programs to bring affordable Internet to all citizens.

 

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