Kotak asked the government to either look at equity infusion, to keep the state-run telecoms firm alive, or shut it down and bear a one-time lossNew Delhi: Bharat Sanchar Nigam Ltd’s (BSNL) total operating losses have likely crossed Rs 90,000 crore by December end, said Kotak Institutional Equities (KIE), who asked the government to either look at equity infusion, to keep the state-run telecom firm alive, or shut it down and bear a one-time loss to save expenses. Kotak Equities’ report also demonstrates a bleak image of the entire industry because of low tariffs and expectations of not-so-healthy proceeds from the upcoming spectrum auction if it happens.
‘The sector may bleed more in future’
If pricing does not move up, the sector may bleed further, the report warned.
“We believe the days of supernormal exchequer surplus from the sector may be over. Hyper competition and smart spectrum auction design led to generation of material surplus for the exchequer in the past decade,” said the KIE report.
“We see low probability of ‘blockbuster’ spectrum auctions in the next few years.”
‘Troubles mounting for BSNL’
“Troubles rising at BSNL (Bharat Sanchar Nigam Ltd). BSNL missed paying its February 2019 employee salaries on time and has not paid the same yet. The government will bear an increasingly larger share of the burden of sector stress, if pricing does not move up soon,” the report added.
“We wouldn’t bet on larger implications in the form of the government taking a fresh look at ‘sector health.’”
Low or no-cost spectrum allocation not enough
The preferential low or no-cost spectrum allocation will not solve the problem alone, the report further states. The management of the state-run telecom firm had looked at preferential equity infusion in the company in place of providing 4G spectrum.
PSU Watch is a business news brand of 27 Frames Communications LLP. It places the spotlight on PSUs, Governance, Bureaucracy, Defence and Public Policy as the sector traverses through a period of radical change.