Editorial – June 2017

BSNL has been lowering its projections. Operational revenue of Rs 26,500 crore in FY 2016-17 is 7 pc lower than what it achieved in the previous year, Rs 28,449 crore. This is also 13 pc less than the figure targeted in the MoU for FY 2016-17 at Rs 30,500. Similarly it has projected a decline in its networth.

In the technology industry, to embrace old versions, is to invite disaster and extinction. But never mind this logic. If BSNL is falling, it is not its fault; it is the fault of those other operators who are deploying the latest, upscale technologies.

The buying patterns of the leading Indian telcos show that 80 pc is 4G, 17 pc is 3G, and 3 pc is 2G. But BSNL is buying in the reverse order. Last year it invited bids for procuring 3.10 crore mobile connections, out of which 59 pc is 2G, 36 pc is 3G and just 5 pc is 4G. It is a double whammy, first because it is an outdated technology and second because BSNL’s 2G license will expire in April 2019 and it will have to renew 2G spectrum at market determined price. At 2015 auction price, the 2G spectrum held by BSNL is worth Rs 56,875 crore. Presently, BSNL is using non-liberalised, administratively allotted spectrum in the 900 MHz & 1800 MHz bands for providing its 2G services. BSNL has total of 138.2 MHz in the 900 MHz band, and 67.4 MHz in 1800 MHz band. The spectrum was allotted in 1999 and will expire in April 2019.

Even if BSNL wants to retain a part of it – say 5 MHz in 900 MHz, then also it has to pay at least Rs 40,325 crore at 2015 price; and for 5 MHz in 1800 MHz, it must pay at least Rs 10,557 crore.

Given these financial realities, does it make any business sense to make new investments in 2G network for replacing old 2G network! BSNL has made the specious argument that the replacements reduce costs. Isn’t the purpose of opex reduction, better served by installing new 3G BTS sites and migrating 2G customers to 3G? And what possible opex reduction can such buys achieve when the validity of the 2G spectrum itself is just till 2019. This investment has no longevity benefits.

DPE’s classification of BSNL as “Incipient Sick” would soon have to turn to more severe labels.