State-owned telecom firm has the largest fixed-line infrastructure in the country

The Department of Telecom is looking at the possibility of hiving off the optical fibre cable infrastructure owned by Bharat Sanchar Nigam Ltd into a separate entity in a bid to unlock value.

BSNL has the largest fixed-line infrastructure in the country, with a network of over 600,000 route kilometres of optical fibre cable.

The move is part of the Government’s decision to hive off various assets owned by BSNL into separate units. This includes the company’s land and tower assets. BSNL’s cable assets are of high value given that the telecom industry is shifting towards high-speed broadband services.

Fibre-based cable networks act as a backbone to transmit data even on wireless networks. Private telecom companies such as Reliance Jio and Airtel have inked an agreement to share each other’s cable network. So far, BSNL has not been able to strike any such deals with private telecom companies.

The Government is hoping that the business opportunity for BSNL will change by hiving off the assets into a separate unit. For example, it is looking to offer an equity stake to private players in the tower asset unit.

Second largest portfolio

BSNL has 61,622 towers, which is the second largest tower portfolio among all telecom companies. Indus Towers, a joint venture between Airtel, Vodafone and Idea Cellular, is the largest player with 120,000 towers.

According to DoT calculations, if the tower assets were a separate entity, that entity would have earned ₹964 crore in 2012-13. Based on certain assumptions, DoT expects the EBITDA of the proposed tower company to touch ₹2,357 crore by 2023.

The total asset base of the proposed company is estimated to be ₹7,226 crore, with fixed assets of ₹6,517 crore and net working capital of ₹708 crore.

Since the hiving off will impact BSNL’s top line, it has been proposed to incorporate ₹2,500 crore as loans from BSNL at an interest rate of 12 per cent. The earnings by way of interest would neutralise the negative cash impact on BSNL, the note stated. Earnings from the optical fibre network could be much higher as BSNL’s infrastructure reaches some of the remotest parts of the country.

Union may oppose move

However, the biggest opposition to this move is coming from the employees union, which has threatened to go on an immediate strike if any decision is taken without discussion.

(This article was published on March 11, 2014)
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