Loss-making state-owned telecom operator BSNL is trying hard to shore up its revenues by getting into agreements with private players for sharing its over 70,000-strong tower infrastructure. The firm is close to sealing a deal of this kind with Reliance Industries (RIL) subsidiary Infotel Broadband, which would be its biggest in the space so far.
According to people close to the development, BSNL is in advanced stages of negotiations with RIL for sharing around 24,000 of its towers. RIL’s Infotel Broadband is expected to launch its 4G services (broadband wireless access or BWA) by the end of this year and needs towers for the same. The deal with BSNL would signal its first major step towards the impending launch.
Sources said BSNL is offering around 22% discount over the prevailing market rentals for towers. The market rentals are in the range of R15,000-18,000 per month whereas it is offering its towers to RIL for around Rs 12,000 per month. Compared with the rentals charged by the PSU from other operators using its towers, the discount for RIL could be around 50%.
When contacted, an RIL spokesperson declined to comment on the development.
BSNL chairman and managing director RK Upadhaya said in a text message to FE, “BSNL is having tower sharing agreement with almost all the telecom service providers. Currently am out of Delhi and in a meeting”.
The deal works to the advantage of both the parties. For Infotel, which is the only BWA operator to have spectrum in all the 22 telecom circles in the country, the discount would be quite attractive to begin the services. Further, with the failure of new mobile operators to roll out their services on a large scale, there is surplus capacity in the market. In this scenario, the BSNL deal would further drive down the tower rentals.
For BSNL, it offers an opportunity to get into a big-time tower sharing deal. The company has been the slowest into getting into such pacts and has also been a late starter. Further, its tenancy ratio is the worst in the market today.
The company started getting into tower sharing pacts only when in 2010 the Sam Pitroda-led committee suggested it to do so. To this day it rents only around 1,500 of its more than 70,000 towers, and that too only to a few new operators.
According to analysts, the only problem the company could risk getting into is charges of lack of transparency in forging the deal because it is offering a huge discount in rentals without floating any tenders.
BSNL has been posting losses for the last three years now and in terms of subscribers, at 97.7 million, it trails Bharti, Vodafone, Reliance Communications, Idea Cellular and Tata Teleservices. For 2011-12, its losses are expected to be around Rs 7,000 crore. During 2010-11, the company's net loss stood at Rs 5,997 crore on a revenue of Rs 28,876 crore.
Its financial position took a major hit after it coughed up Rs 18,500 crore as payment for 3G and BWA spectrum for which it had to dip into its cash reserves.
With both these services not taking off, it has even approached the department of telecommunications (DoT) to surrender its BWA spectrum in 20 circles. Though the DoT has accepted its request, it is not going to offer any immediate respite to the company financially because the government has decided that the refund of the money paid would take place only when the surrendered spectrum is put for auction. This is not expected before next year.
According to people close to the development, BSNL is in advanced stages of negotiations with RIL for sharing around 24,000 of its towers. RIL’s Infotel Broadband is expected to launch its 4G services (broadband wireless access or BWA) by the end of this year and needs towers for the same. The deal with BSNL would signal its first major step towards the impending launch.
Sources said BSNL is offering around 22% discount over the prevailing market rentals for towers. The market rentals are in the range of R15,000-18,000 per month whereas it is offering its towers to RIL for around Rs 12,000 per month. Compared with the rentals charged by the PSU from other operators using its towers, the discount for RIL could be around 50%.
When contacted, an RIL spokesperson declined to comment on the development.
BSNL chairman and managing director RK Upadhaya said in a text message to FE, “BSNL is having tower sharing agreement with almost all the telecom service providers. Currently am out of Delhi and in a meeting”.
The deal works to the advantage of both the parties. For Infotel, which is the only BWA operator to have spectrum in all the 22 telecom circles in the country, the discount would be quite attractive to begin the services. Further, with the failure of new mobile operators to roll out their services on a large scale, there is surplus capacity in the market. In this scenario, the BSNL deal would further drive down the tower rentals.
For BSNL, it offers an opportunity to get into a big-time tower sharing deal. The company has been the slowest into getting into such pacts and has also been a late starter. Further, its tenancy ratio is the worst in the market today.
The company started getting into tower sharing pacts only when in 2010 the Sam Pitroda-led committee suggested it to do so. To this day it rents only around 1,500 of its more than 70,000 towers, and that too only to a few new operators.
According to analysts, the only problem the company could risk getting into is charges of lack of transparency in forging the deal because it is offering a huge discount in rentals without floating any tenders.
BSNL has been posting losses for the last three years now and in terms of subscribers, at 97.7 million, it trails Bharti, Vodafone, Reliance Communications, Idea Cellular and Tata Teleservices. For 2011-12, its losses are expected to be around Rs 7,000 crore. During 2010-11, the company's net loss stood at Rs 5,997 crore on a revenue of Rs 28,876 crore.
Its financial position took a major hit after it coughed up Rs 18,500 crore as payment for 3G and BWA spectrum for which it had to dip into its cash reserves.
With both these services not taking off, it has even approached the department of telecommunications (DoT) to surrender its BWA spectrum in 20 circles. Though the DoT has accepted its request, it is not going to offer any immediate respite to the company financially because the government has decided that the refund of the money paid would take place only when the surrendered spectrum is put for auction. This is not expected before next year.