Ahead of allocations, the department has asked the PSU to submit a plan of action on 4G service roll-out preparedness such as equipment procurement and also the means to finance the system update.
“We will allot BSNL a few (5 Mhz) spectrum for 4G support and therefore we have asked the company to submit a report of the 4G preparedness and how they intend to secure equipment for it. In addition, we want to know the origin of their financing for the capex arising out of the 4G network growth so the funds allocated via the spectrum might be best used,” a senior DoT official stated.
The official added that the allocation of spectrum to BSNL has an opportunity cost as, had that been auctioned to private telcos, the government might have earned earnings. “But we have to confirm the PSUs. In the same time we’ll track their preparation and equipment and pre-launch preparedness too,” the official said.
The official also said that while both BSNL and MTNL would be allocated the 4G spectrum these questions have been delivered to BSNL only rather than to MTNL. As per BSNL Board proposal, the cost of this spectrum is in the range of Rs. 11,000 crore. In 2017, BSNL had delivered a board proposal searching for 5MHz spectrum in the 2100 MHz band, which it needed to partially fund by providing additional equity to the government.
The purchase of additional spectrum in the 2100 MHz band is almost life saving for BSNL for all-India rollout of 4G services throughout the Long Term Evolution path to match competition. The DoT monitoring and demand for an action strategy report are targeted at ensuring that the funds are fully optimised to guarantee revenue returns to the government.
Another source said the government could stick to the IIM report while allocating 4G spectrum to BSNL. This will require approximately Rs. 1,875 crores of permit fee payment for five years. This may be financed by either equity injection from the authorities or by borrowing the same with guarantee from the government, given the financial state of BSNL.
The report implied that the authorities should pose conditions on BSNL while allocating the spectrum that BSNL should enter competitive tower leasing and sharing agreements with other telecom service providers to reduce the cost of rolling out 4G services by BSNL. Instead of Rs. 11,000 crore requested for by BSNL to roll out 4G services, BSNL might be requested to re-examine the projected capital expenditure with tower-sharing and managed-services model.
The entire cost as per BSNL estimates are Rs. 9,600 crore. BSNL expects to cover half of this amount through equity path (by issuing additional shares to the authorities ) if permitted, and the rest through revenue generated out of company.