BSNL can’t be a pawn in the battle against China

Given the unending Chinese hostilities in Ladakh, it is not surprising that the government should want to ensure that telecom PSU BSNL’s 4G tender does not go to a Chinese vendor like Huawei. Indeed, several other contracts where Chinese firms were involved have been cancelled, and the government has, in three tranches, even banned various Chinese apps. But, the question is whether the tender needed to be cancelled altogether; couldn’t BSNL be allowed to proceed with the tender with the rider that no Chinese firms would be allowed to participate?

After all, while Chinese firms are amongst the most competitive in the world, it is not as if there aren’t other suppliers; firms like Nokia and Ericsson come to mind immediately. It has been nearly six months since the tender was first floated—it was subsequently cancelled—and it is still not clear how long it will take for a new tender to be finalised and then acted upon.

Indeed, even before the Chinese angle came in, the tender seemed to be in trouble with some local vendors complaining that they had been shut out thanks to its turnover requirements. Indeed, now that the tender has been cancelled, the government has decided that the initial plan of getting a telecom equipment supplier to roll out the 4G network is no longer good enough. Instead, BSNL will go in for a mix-and-match approach; it will buy equipment from different suppliers—this will allow smaller Indian vendors to participate in the tender—and appoint a system-integrator to put it together. It is true that this is being tried out by some companies; indeed, in India, RJio has announced that it will set up its own 5G network.

A solution like this may be a good idea for a firm that has well-established project execution capabilities and which can, in case things go wrong, afford the time that it takes to fix things. Time, however, is something BSNL simply doesn’t have, and that is why it needs to deal with one telecom equipment vendor with a well-established record of delivering networks on time. In the last five years, from FY15 to FY19, BSNL’s turnover has fallen from Rs 28,645 crore to Rs 18,865 crore, and its losses have risen from Rs 8,234 crore to Rs 13,804 crore.

Indeed, even at the time the government announced a Rs 70,000 crore bailout package for BSNL-MTNL, it was always clear a recovery was going to be an uphill task; and also that the Rs 70,000 crore number being talked about was actually an understatement. Had the two PSUs paid for the renewal of their 900 MHz spectrum last year, this would have cost them around Rs 27,000 crore or so. Similarly, while the 80% increase in revenues assumed by FY25—over the likely FY20 revenue—in the BSNL-MTNL recovery plan itself is optimistic, this means BSNL-MTNL returning to profitability only in FY24.

But, if a year is lost in the new tendering process, that will push BSNL-MTNL’s revival that much further down the road. In the mid-2000s, BSNL lost its premier position in rural mobile telephony precisely because it was asked to cancel two of its tenders and to rebid them when firms argued the tenders discriminated against them. The last thing a government trying to revive BSNL-MTNL should be doing is to slow down its network addition at a time when it so desperately needs to be able to offer 4G connections to subscribers.