New Delhi: Dispelling popular and widespread expectation of a divestment of the two giant state-run telecom PSUs BSNL (Bharat Sanchar Nigam Ltd) and MTNL (Mahanagar Telephone Nigam Ltd) the Narendra Modi government, once again pulled out a surprise on October 23 when the Union Cabinet announced quite rather the opposite, a revival package of the two deeply distressed state-run telcos. This was deemed to be among the remotest of possibilities.
Now the two loss-making companies that 30 years ago enjoyed a monopoly in providing telephone connectivity will be merged into a single entity.
Even an attractive Voluntary Retirement Scheme (VRS) for any employee aged 50 years plus who wants out is being laid out.
These two were among a slew of other announcements including allocation of additional 4G spectrum to clear the congested network and monetization of assets which together is expected to game-change the government’s hitherto underplayed and ineffective role in the telecom sector.
Actually, it was a more clear signal of governmental intent underlining the growing importance and strategic nature of the telecom industry that has nowadays blurred the distinction between the cyber world, data, and communication.
Telecom is now both a service as well as a product. That is why governments across the world like China and the United States take more than an abiding interest in things telecom.
Moreover, critically important telecom networks like that of the military, ride on these state-owned PSUs which is officially mandated in the interest of security and secrecy.
And as we stand at the threshold of a 5G rollout across the world and in India which is expected by 2020, telecom is increasingly entering the realm of artificial intelligence. China has already taken a leap on the 5G rollout.
Besides the security issue and the strategic nature of the telecom sector, the Indian government’s intent has got a welfare aspect too.
It is indicative of a commitment to bridge the digital divide by taking telecom products to the underprivileged and the unprivileged and to take it to remote corners of the country where no private telecom would never ever go. Like the Northeast region or to the Siachen glacier.
Till now, the ‘white elephant’ thesis was predominant and seemingly that is what the two PSUs fell victim to.
Read more: Falling credit growth to prolong economic recovery: Report
Huge inefficiencies, growing losses and debt, a job culture of unaccountability, a burgeoning wages bill, and a shrinking share in the market space in the face of fierce competition by private companies that offered a range of services with a customer-friendly interface had contributed to the declining fortunes of the BSNL, the much bigger of the two.
While about two-thirds of the fixed-line market in India is still controlled by BSNL and MTNL, in the more important mobile telephony space, together BSNL and MTNL cater to just 10 per cent of the customers.
This is even as 75 per cent of the company’s earnings went towards salaries. Not surprisingly, in 2018-19, BSNL’s revenues fell by about Rs 14,000 to Rs 19,308 crore.
That the VRS has been properly planned and hence well-received can be gauged by the fact that in the last week, about 70,000 of the 1,65,000 BSNL’s total workforce have opted for the ‘golden handshake’ Even with this number, BSNL will save about Rs 7,000 crore a year on its salary bill. The VRS offer closes on December 3.
Given the circumstances and the situation where BSNL was finding it difficult to pay the monthly salaries to its employees and in the backdrop of financial losses, balancing of security, strategic and welfare nature of the telecom assets, it was the best the government could do. After all, divestment would also need buyers. And pray, who will proffer to buy BSNL-MTNL?
