Cabinet Approves Financial Assistance to BSNL, MTNL: Report

Cabinet Approves Financial Assistance to BSNL, MTNL: Report
New Delhi: In a bid to revive the flagging fortunes of BSNL, the government on Wednesday approved hiving off the state-owned firm's tower business into a new company as well as compensating it and MTNL Rs 627.20 crore for 800 MHz CDMA spectrum that they surrendered.

According to a source, the Union Cabinet has given 'in principle' approval for hiving off mobile tower assets of BSNL into a separate company, which will help the state-run company improve its financial position by unlocking the value of its mobile towers.

Consequent to the approval, the Department of Telecom can constitute an inter-ministerial group for working out the capital and organisational structure of the new company after market valuation of its tower assets, which will be considered by the Union Cabinet, the source said.

BSNL mobile tower assets consist of about 64,500 towers and more than 50,000 tower sites have optical fibre cable connectivity. The company expects valuation of its mobile tower company to be to the tune of Rs 20,000 crore.

From 2010 fiscal onwards, BSNL began sharing its tower assets with other operators but it is yet to realise full potential of its market share.

The Cabinet also approved to extend financial support of Rs 169.16 crore to BSNL and Rs 458.04 crore to MTNL totaling Rs 627.20 crore on surrender of 800 MHz CDMA carriers in few of their circles, the source added.

BSNL has surrendered spectrum (one carrier of 1.25 MHz each) for 4 circles and MTNL in Delhi and Mumbai (two carriers of 1.25 MHz each).

The source further said there has been a gain for the government as the sale of this spectrum for 20 years has yielded a revenue of Rs 3,997.61 crore to the government which otherwise would not have been available in case the spectrum was not put to auction.

"The surrender of spectrum by BSNL and MTNL enhanced contiguity of spectrum in some licensed service areas thereby enabling higher prices obtained in auction," the source said.

Contiguity of spectrum enhances the special efficiency, and usability of airwaves with different technologies has an impact on competitive bidding through e-auction.

On hiving off BSNL towers into a separate company, the source said consequent to this approval, the DoT is authorised to constitute an inter-ministerial group for working out the capital and organisational structure of the new company after market valuation of its tower assets for consideration of the Union Cabinet.

The tower industry has emerged an independent business vertical for telecom players to harness the potential for sharing of infrastructure.

Besides the captive model in BSNL and MTNL where the service provider owns their passive infrastructure also, there are three different business models within the tower industry.

The models include companies created by hiving off tower assets portfolios of service providers into subsidiaries, companies established as independent joint venture entities by service providers and companies promoted by specific service providers but established as independent entities with the promoter being the anchor tenant for the tower company.

BSNL explored various options for restructuring and gainful utilization of tower infrastructure in consultation with the telecom department, the source said.

In line with market practices, it was decided to form a 100 per cent subsidiary of BSNL with outsourced operations and maintenance (O&M) and sales and marketing functions.

The new tower company is expected to have a lean management and operational structure.

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