Spectrum sharing offers the easiest way out
Given how losses for both BSNL and MTNL have mounted over the yearsfrom R1,823 crore in FY10 to R8,198 crore in FY13 for BSNL and from R2,611 crore to R5,300 crore in FY13 for MTNLthe best solution is to privatise both firms. While various plans have been drawn up to revive both PSUs, it seems difficult given that as compared to the industry average of 5%, MTNLs wage payments are more than its revenuesBSNL is better in comparison but its wages add up to a whopping 49% of turnover. But privatising PSUs, and around election time, isnt going to happen, not least in a government that is having a problem selling a 10% stake in Coal India because its unions are objecting.
Fortunately, there is a simpler solution at hand, to keep the PSUs going till such time the government, perhaps the next one, takes a tough stand. The latest Trai report offers a solution when it says that, based on industry usage norms, MTNL should not have more than around 6 MHz of spectrum as compared to the 13.85 MHz it has right now. Using a similar method, it turns out BSNL too has around 2.5-3 MHz extra spectrum. Ideally, given the way the two PSUs have surrendered their BWA spectrum, they should be asked to give this up, and the spectrum can be auctioned. That money, however, cannot then be used by the companies since the spectrum belongs to the government. It would be much better, for now, if the government changed its policy to allow sharing of spectrum. MTNL and BSNL could then offer this to private firms who can use this to expand their networksin return, they could offer a revenue share to both PSUs. While most firms have enough 2G spectrum, or will have once the January auctions are over, neither PSU has really used its scarce 3G spectrum efficiently. More than 2G spectrum, this offers good scope for sharing since, with data usage rising and the government unlikely to be able to free up more 3G spectrum soon, existing telcos are strapped for spectrum. Obviously a more permanent solution is required to save MTNL and BSNL, but for now this seems the most workable.