Govt mustn't fund BSNL/MTNL 'extra' spectrum
Should the Cabinet finally clear the proposal to ask telcos to pay for the ‘extra’ spectrum they have over 4.4 MHz, the ultimate irony will be it will have to pay part of this itself. Both telecom PSUs BSNL and MTNL have the largest amount of ‘extra’ spectrum, and will have to pay around R11,000 crore, but don’t have the money to do so. So, the government will have to fund the two first and then get them to pay the penalty. While doing so, the government would do well to introspect on the future of the two telcos. Over half of BSNL’s subscribers are inactive and in the case of MTNL the figure is 60%. In the case of rural telephony, BSNL has slipped to the third or fourth position. Both firms got their 3G spectrum a year before the private sector firms did, but weren’t able to do anything with this. In the case of BWA, their performance is even more dismal and the government has been quite indulgent in agreeing to let the two give back their spectrum and to refund what they have paid for this.
While profits of private sector telcos have come down, BSNL has been incurring losses for more than three years now. During 2011-12, it posted a net loss of R8,850 crore. MTNL’s losses stood at R4,018 crore. The only strategy these companies have is to reduce tariffs, which can be dangerous if it doesn’t result in more customer accretion. In which case, the government needs to think hard about whether it wants to continue funding telcos that really have no turnaround strategy. And the large spectrum holdings the telcos have will fetch a tidy sum of money.