Ahead of all allocations, the department has requested the PSU to submit a plan of action on 4G support roll-out preparedness including equipment procurement and also the capacity to fund the system upgrade.
“We shall allot BSNL a few (5 Mhz) spectrum for 4G support and for that we have asked the company to submit a record of the 4G preparedness and the way they intend to procure equipment for it. We also wish to be aware of the origin of the funding for the capex arising out of the 4G network expansion so the funds allocated via the spectrum might be best utilized,” a senior DoT official said.
The official added that the feasibility of spectrum to BSNL has an opportunity cost as, had that been sold to personal telcos, the authorities could have earned earnings. “But we have to support the PSUs. At exactly the same time we will track their preparation and gear and pre-launch preparedness too,” the official said.
The official also stated that while both BSNL and MTNL would be allocated to the 4G spectrum these queries have been sent to BSNL only and not to MTNL. According to BSNL Board proposal, the cost of the spectrum is at the range of Rs. 11,000 crore. In 2017, BSNL had sent a board proposal seeking 5MHz spectrum at the 2100 MHz band, which it wanted to partly fund by offering additional equity to the authorities.
The purchase of additional spectrum in the 2100 MHz band is virtually life saving for BSNL to get all-India rollout of 4G services through the long-term Evolution path to match contest. BSNL and MTNL’s 4G spectrum allocation through the equity route and government financing has faced opposition from the Finance Ministry and Niti Aayog who see no return on this investment. The DoT tracking and requirement for an action strategy report are targeted at ensuring that the funds are fully optimized to ensure revenue returns to the government.
Another source said the government could stick to the IIM report while allocating 4G spectrum to BSNL. The report had proposed that 5 Mhz of spectrum in 2100 MHz band as 4G spectrum should be allocated to BSNL immediately but just for a limited 5-year period. This may require approximately Rs. 1,875 crores of license fee payment for 5 years. This can be financed by either equity injection from the government or by borrowing the same together with guarantee from the government, given the fiscal condition of BSNL.
The report implied that the government should present conditions on BSNL while allocating the spectrum that BSNL should get into competitive tower leasing and sharing agreements with other telecom service providers to reduce the expenditure of rolling out 4G services by BSNL. Rather than Rs. 11,000 crore asked for by BSNL to roll out 4G solutions, BSNL may be requested to re-examine the projected capital expenditure with tower-sharing and managed-services version.
The total cost according to BSNL estimates are Rs. 9,600 crore. BSNL expects to cover half of this amount through equity route (by issuing additional shares to the government) if allowed, and the rest through revenue generated out of company.