- The government has proposed Rs 74,000 crore bailout package for state-run telecommunication companies Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL).
- The scheme involves an attractive exit package of an additional five percent compensation(ex-gratia) and provisions for 4G spectrum and capital expenditure.
- BSNL is India’s largest loss-making state-run entity.MTNL comes third with.Only national carrier Air India has a higher loss than MTNL.
- BSNL and MTNL have been struggling to compete with private players in the sector due to high costs and poor management.Neither company has rolled out 4G services.
- Further,average revenue per user(ARPU) of these two telcos stands at Rs 38 compared to Rs 70 for private players.
- The government is considering lowering the retirement age to 58 from 60 and offering a decent exit package which will lower the cost at the loss-making companies.
- The government is also evaluating the option of monetising assets such as towers, land bank and optical fibre of BSNL and MTNL.
- The government has also said that the bailout is a better option than closing the two PSUs.This is because strategic divestment might not find too many buyers given the financial pressure in the telecom sector.
7 min read