To revive state-owned telecom firm Bharat Sanchar Nigam Limited (BSNL), the Union Cabinet on July 27 approved a Rs 1.64 lakh crore revitalisation plan.

The package has a cash portion of Rs 43,964 crore and a non-cash portion of Rs 1.2 lakh crore for four years and will include an administrative allocation of 4G spectrum worth Rs 44,993 crore. Additionally, Bharat Broadband Network Ltd (BBNL), established to implement the ambitious BharatNet project, will merge with BSNL.

Other key components of the plan include Capex support of Rs 22,471 crore, viability gap funding of Rs 13,789 crore for rural wireline operations, debt structuring through the raising of sovereign covered bonds worth Rs 40,399 crore and funding for AGR (Adjusted Gross Income) to provide financial support worth Rs 33,404 crore.

The Cabinet also approved a package worth nearly Rs 7,000 crore for the revival of BSNL and MTNL in 2019, as well as approval in principle for the merger of the two entities.

“BSNL is profitable after the 2019 package. Its operating profit is close to Rs 1,000 crore. So, it’s not that we haven’t seen any results from the previous package. It’s a good result, which gives us hope and confidence that the company is now a stable company,” Telecommunications Minister Ashwini Vaishnaw told reporters.

He added that customer churn has stopped, and BSNL’s market share is now stable at around 10%, while revenue is now stable at around Rs 19,000 crore.

“With the first package, BSNL becomes a stable entity. Under today’s revival plan, it will become a viable entity,” the minister added.

The Cabinet has approved the allocation of spectrum worth Rs 44,993 crore in the 900/1800 MHz band to support BSNL’s 4G services, adding that this will allow the company to compete in the market and provide high-speed data. The government will fund capital expenditures of Rs 22,471 crore over the next four years to “facilitate the development and deployment of the Atmanirbhar 4G stack”.

In addition, the government will provide Rs 13,789 crore to BSNL as viability gap funding for rural wireline operations that are not commercially viable from 2014-15 to 2019-20.

In addition, to ease balance sheet pressure, statutory dues of Rs 33,404 crore will be converted into equity. The government will provide sovereign guarantees to the company to raise Rs 40,399 crore of long-term bonds to meet its current high-cost debt. BSNL’s total AGR dues of Rs 33,404 crore will be settled through conversion into equity, while BSNL will also reissue preferred shares of Rs 7,500 crore to the government.

Instead of paying dues, providing capital expenditure and allocating spectrum, the authorised capital of BSNL will be increased from Rs 40,000 crore to Rs 1.5 lakh crore.

“Through these measures, BSNL will be able to improve the quality of its existing services, launch 4G services and become financially viable. With this revival plan implemented, BSNL is expected to turn a profit and generate a net profit over the next 3-4 years,” the minister said.

He added that BSNL’s 8.6 lakh km fibre would be expanded by merging with BBNL, which owns the BharatNet project and 5.8 lakh km fibre network. With this, BSNL will have a fibre network of 14 lakh km.

“The revival plan will enable BSNL to improve services and generate net profit within 3-4 years. Its 5G services will be launched in the next 1.5-2 years,” Mr Vaishnaw said. “In 1-1.5 years, its 4G telecom services will benefit people’s livelihood.” Regarding the merger of MTNL and BSNL, he said that the plan is still in progress but “requires a complex financial restructuring”, although the two companies are joint ventures.