Govt to take call on capital infusion in BSNL, MTNL this month

New Delhi: The Union Cabinet is expected to take a call on capital infusion into two cash-strapped state-owned telecom companies — Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) — this month. The Union Cabinet will take a decision on 4G spectrum allocation to them by the third week of September after the Department of Telecom (DoT) places a note before it for consideration.

"The decision (from Cabinet) could come this month. Cabinet may take decisions on 4G spectrum allocation to BSNL/MTNL by the third week of September. Thereafter it may take about three to six months' time to complete the formalities and both PSUs may get the spectrum worth," sources said.

Green signal from Solicitor General

The Solicitor General has already given a green signal to the administrative allocation of 4G spectrum to BSNL and MTNL. The ball is, therefore, now in the government's court. This key legal advice had to be sought before the Cabinet could take up the proposal, sources said.

BSNL and MTNL, being PSUs, do not participate in spectrum auction. However, they pay the highest bidder price for the spectrum. The absence of 4G services in the two PSUs' product portfolio has further weakened the market share of the two companies.

Fund infusion could take place via bonds

According to sources, fund infusion into both BSNL and MTNL could take place via bonds as was done with public sector banks (PSBs).

Earlier, the government was mulling paying 50 percent of the cost for 4G spectrum allocation, while the telcos would cover the rest of it. However, that plan has been dropped since the two PSUs are struggling to clear staff salaries.

What's the current situation?

While BSNL has not paid its 1.76 lakh employees salaries for the month of August, MTNL has not cleared dues for the last two months. Both the companies are planning to cut down their employee cost by offering voluntary retirement to ageing employees. The two PSUs spend a big chunk of their revenues on employee cost — BSNL spends 75.
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06 percent and that of MTNL is 87.15 percent of their total income. The corresponding figures for BSNL's and MTNL's private competitors vary between 2.9 to 5 percent.