Cabinet may take up capital infusion in BSNL, MTNL in September

New Delhi: After PSU banks, the government is likely to infuse capital in two chronically ill telecom PSUs BSNL and MTNL, and the Union Cabinet is likely to take a decision on 4G spectrum allocation to them by the third week of the current month after DoT places the note before it for consideration.

The cabinet could take up the 4G spectrum proposals for these telcos as the legal opinion from the Solicitor General has come giving a green signal to the administrative allocation. This key legal issue was needed to be cleared before the cabinet could take the proposal, said sources. BSNL and MTNL being PSUs dont participate in spectrum auction. But they pay the highest bidder price for the spectrum they are seeking to obtain.

"The decision (from Cabinet) could come this month. Cabinet may take decisions on 4G spectrum of BSNL/MTNL will be taken by the 3rd week of September. Thereafter it may take about 3 to 6 months time to complete the formalities and both PSUs may get the spectrum worth, sources said. In a highly competitive data oriented market, not having 4G services on wireless networks are further aggravating the weak marketshare of the two PSUs .

The funds infusion in both BSNL and MTNL, according to sources will be through bonds as has been the case of PSU bank recapitalisations.

The government will go for 4G spectrum allocation to the two telcos as 100 percent capital infusion against earlier proposal to 50 percent while the rest 50 percent were to come from PSUs but looking at their extremely weak financials where both are unable to pay salaries, this idea was dropped.

The BSNL has not paid salaries to its 1.76 lakh employees for August and MTNL has not paid for the last two months. The cost of 4G spectrum to them will cost Rs 20,000 crore. BSNL has sought allocation of an additional 5 MHz spectrum in 2100 MHz band preferably contiguous to its existing 5 MHz block in the same band in all service areas, except Rajasthan where spectrum in not available. For Rajasthan, the operator has sought 5 MHz in 800 MHz band for launching of 4G services. The value of spectrum is around Rs 14,000 crore. For MTNL, the airwaves will cost Rs 6,000 crore.

The Department of Telecom to be on the safer side of Supreme Court's 2012 order that radio waves must be auctioned to get maximum value from commercial use, had sought the opinion of the solicitor general (SG) Tushar Mehta where it has received a positive response. This clears the desk for any legal hurdle for BSNL/MTNL or cabinet on allocation of 4G spectrum to them.

The stressed telecom firms have approached the Telecom Department for immediate help as they are facing financial stress. This has been aggravated due to the tariff war triggered by the entry of Reliance Jio.

The employee cost of the BSNL is 75.06 percent and that of MTNL is 87.15 percent of their total income, while the same for private telecom companies varies between 2.9 to 5 percent.