Strong state-backed player not good for telecom sector: report

As the government marks the revival of BSNL and MTNL on top of its agendas, a Credit Suisse report has said that a ‘strong state-backed competitor’ is not good for private sector telecom operators.

“A strong state-backed competitor is not good news for the industry of course, and this item being on top of the list could mean some seriousness,” Credit Suisse said in its report on the Indian telecom sector.

The report said these two companies (BSNL and MTNL) have the second largest spectrum market share after Bharti Airtel, and they can “differentiate” themselves if they get their act together.

Minister of Communications and IT Ravi Shankar Prasad has recently spelt out his priorities for the telecom sector that include revival of BSNL/MTNL, broadband connectivity for 2.5 lakh village panchayats and developing India as a global electronic manufacturing hub.

Mr. Prasad said improvement of BSNL and MTNL performance and infrastructure would be a priority for him.

He has decided to play a pro-active role in monitoring functioning of both the firms, for which a NOC (Network Operations Center) will be set up in Sanchar Bhawan.

The Minister also held a meeting with senior management of the two companies a few days back and asked them to strictly follow the timelines for the revival.

In 2012-13, MTNL recorded a net loss of Rs. 5,321.12 crore on annual revenue of Rs. 3,428.6 crore. BSNL losses, as per unaudited results, stood at Rs. 8,198 crore for 2012-13, compared with Rs. 8,851 crore posted in 2011-12.

BSNL has been logging losses since 2009-10. The company’s profits started declining after 2004-05, when its earnings stood at Rs. 10,183 crore.

The report, however, said that “any major turnaround will require infusion of capital. Hence, while this is an area to keep an eye on, we believe the eventual turnaround will require big hurdles to be crossed”.

The research firm termed the broadband project for connecting village panchayats as a positive step for the entire industry.

“If the project starts now, the benefits should start accruing within a year’s time, in our view. With fibre sharing now gaining acceptance within the industry, we believe the industry would have anyway gone ahead with its own shared fibre installation,” it said.