Editorial – July 2019

Equipment and software vendors who have fulfilled their orders for BSNL can forget about getting their payments. The management of BSNL is working on a capex freeze agenda. Only sundry debtors with meagre outstandings to the tune of Rs 1.50 lakh will receive their dues. Particularly hard hit will be the big vendors who have supplied network equipment to BSNL. Even MSMEs are in for a rough patch. There are no upgradations or even routine expansion that are being considered. So is this the end of the road for BSNL and is its sale imminent?

MTNL has been a bad story for a long time now. For the last six months it has not even paid employee salaries on time. The auditor’s report is severe and it states that MTNL’s continuation as a going concern is doubtful.

Meanwhile, the cabinet secretary has held two rounds of meetings about the two telecom PSUs. At the end of these meetings it was decided to move a cabinet note among various ministries and departments for feedback. Broadly five decisions were taken.

First, delisting of MTNL and its merger with BSNL. Second, reduction of annual staff cost by Rs 7,500 crore through VRS and reduction in retirement age to 58 years. The 100 per cent cost of VRS, Rs 16,000 crore is to be funded through fresh bank loan. Third, reduction in interest costs by transferring the existing bank loans (BSNL Rs 19,500 cr + MTNL Rs 20,000 cr) to an SPV alongwith equivalent land assets of the two PSUs. Fourth, government will give free 4G spectrum in the form of equity. Fifth, capex of about Rs 30,000 crore may be raised through monetisation of existing assets – Fiber and Towers – by transferring them to InvIT.

It is learnt that only the cabinet secretary was keen about revival plans. The finance ministry and Niti Aayog are opposed to it and want both disinvested.

But till the time these steps are taken, all those who have their investments stuck up in BSNL are left to hang out to dry.

In all of telecom sector, capital infusion through promoter equity infusion (which in BSNL & MTNL’s case is the government) and asset monetisation is happening for debt servicing and capex. Private telecom operators with far greater debt than BSNL are deleveraging their balance sheets through their asset companies while simultaneously investing and pushing new technologies into the market. But for BSNL, everything has come to a Big Full Stop. Read our cover story for all details.