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What are PSU Telecos & their issues? Should government shutdown BSNL & MTNL?

What are PSU Telecos & their issues? Should government shutdown BSNL & MTNL?

Tag: GS 3 || Economy  ||  Infrastructure  ||  Communication

Why in news?

  • If most private sector telecom companies are bleeding, state-owned MTNL and BSNL are dying.

Issues

  • Delay in salaries: That BSNL delayed February salaries, and the DoT had to give MTNL funds to pay salaries are symptoms.
  • Legacy issues: Legacy issues, fierce competition and rock-bottom tariffs have led to the sharp decline in the fortunes of the two telcos, despite their early-mover advantage in 3G service.
  • Spectrum: The large payout for 3G spectrum, even as the companies made losses, was a fatal blow.

MTNL & BSNL

  • MTNL’s net worth is completely eroded, while BSNL’s accumulated operating losses have reportedly crossed Rs 90,000 crore.
  • The two together employ 1,98,000 people, whose salaries make up for 90% of the revenues in MTNL and around 60-70% in the case of BSNL.
    • The corresponding figure in their private sector rivals is 4-5%.
  • The VRS scheme for the BSNL and MTNL is estimated to cost about Rs 8,500 crore. The government should foot the bill, neither company can.

Should they continue

  • MTNL operates only in Delhi and Mumbai, both well served by private telcos.
    • If MTNL disappeared, few would notice.
    • Its landline network is a valuable asset, however, that has not been properly leveraged at a time when fibre-to-home is the way to earn high revenues.
    • Given the consolidation in the telecom market, a well-run MTNL that knows how to flex its muscles would be good for the consumer.
  • BSNL, in contrast, is vital to connectivity, wireless and wired, in rural areas and tier-2 and tier-3 towns.

Way ahead

  • The company needs –
    • independent, dynamic management,
    • to provide competition that is secure,
    • technologically agile and
    • will offer a standard of integrity that will elevate conduct across the sector.
  • Political will must be summoned to turn the companies around.
  • They need to go directly to 5G, go lean on man power and leverage their land, fibre and towers to raise funds.

Mains question

  • Examine the role of PSUs in helping government to mobilize resources for reducing the fiscal deficit and undertaking developmental works.