Telcos told to stop sourcing 4G telecom equipment from Chinese firms

The Department of Telecommunications is learnt to have directed state-owned Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) to exclude Chinese gearmakers from supplying 4G telecom equipment. Private telecom operators have been asked to consider staying away from such Chinese firms.
The decision was taken during a meeting of the telecom department, late on Wednesday evening, sources said. It is learnt that BSNL and MTNL representatives were not part of the meeting, but have been informed about the decision. When contacted, the private operators said they were unaware of any such decision by the DoT.
ALSO READ: India-China border dispute: Capable of giving a fitting reply, says PM Modi
Last month, BSNL staff had written to Prime Minister Narendra Modi to stop domestic telecom gearmakers from scuttling the company’s revival plan by putting a spanner in the tender for sourcing 4G equipment. In the letter, they had alleged that the issue raised by the industry body, Telecom Equipment and Services Export Promotion Council (TEPC), was a ploy to stall the 4G equipment procurement and the launch of 4G services by BSNL.
The major private operators — Reliance Jio, Bharti Airtel, and Vodafone Idea — are procuring their 4G equipment from multinational companies, such as Nokia, Ericsson, ZTE, Huawei, and Samsung.

chart
BSNL would be the last company to join the 4G bandwagon as the company prepares to compete with the private telecom companies.
The exclusion of Chinese telecom equipment suppliers may delay the 4G journey for BSNL.
ALSO READ: Indian start-ups funded by Chinese investors hit Great Wall of uncertainty
Private telcos, such as Bharti Airtel and Vodafone Idea, will also be under pressure to not buy from Chinese vendors, even as contracts for their equipment may be cheaper compared to European manufacturers. Ahead of the 5G auction, such a development may come as a challenge for the financially stressed telecom industry.
In fact, Bharti chairman Sunil Mittal had batted for a Chinese manufacturer at a conference last year. He had said Huawei products were superior to those made by European companies.

After challenging 2019, will 2020 be jet, set and go for Indian aviation

India’s aviation and telecom sectors looked alike in 2019, with cut-throat competition ensuring cheap deals for customers but pushing companies in the red. State-run companies bled in both sectors — national carrier Air India needs to be privatised, and telcos BSNL and MTNLneed to be revived.
SpiceJet Chairman Ajay Singh once said both aviation and telecom sectors had “monopolistic” players. Though he did not take names, he was hinting at privately-owned budget carrier IndiGo, which has a 50 per cent share of the country’s domestic passenger market, and Reliance Jio, which emerged on the scene three years ago and became the largest telecom player with a 35 per cent revenue share. Jio continued to grow, even as its rivals posted record losses in 2019.

For airlines, too, 2019 was a year they would like to forget — despite opportunities being created by Jet Airways discontinuing flight operations in July 2019, and the price of aviation turbine fuel (ATF), which accounts for over 40 per cent of their operating costs, remaining low.
To grab the slots vacated by Jet, some Indian airlines, especially low-cost ones like SpiceJet and IndiGo, went on an aircraft-leasing overdrive. However, within five months, domestic seat capacity not only filled the void created by Jet’s exit but was 3.5 per cent higher than a year earlier. Since Jet’s grounding did not create a real seat shortage, airlines could not jack up ticket prices.
Worse, as the Indian economy slowed and they had to keep tariffs low to fill up seats, airlines’ yields came down. Forecasters had expected a passenger growth of 14 per cent — with Jet in business — but they were clearly off the mark. They now predict FY20 passenger growth to be 5 per cent or less. According to research organisation Centre for Aviation (Capa), private airlines could incur a loss of over $600 million this financial year.
Smoother skies?
In December 2019, the three-year-long telecom price war ended with the three top operators raising tariffs. Airline tariffs had also seen some increase a month earlier. Now, will 2020 turn the tide for India’s aviation industry? It will take much more than tariff hikes to get the industry back in the black, say airline executives.
“We saw tariffs going up by 10-12 per cent in November, after falling in the previous quarter. That is a good sign, but airlines have to rationalise their prices to sustainable levels. Zero- to seven-day prices need to go up by 15-20 per cent, and average price by 10-15 per cent higher to bring viability back to the business in 2020,” says Sanjay Kumar, formerly the chief operating officer of Air Asia and chief commercial officer of IndiGo.
Rivals accuse market leader IndiGo of stifling competition by keeping prices low to fill up its new planes. This sounds like telecom operators Bharti Airtel and Vodafone-Idea’s predatory pricing accusation against Reliance Jio. Just like Jio, IndiGo executives rubbish these allegations and instead say they have no choice except matching low-cost carriers’ fares.
A positive trend in 2020 will be slow capacity additions, even contraction according to Capa. Sanjay Kumar (quoted earlier) sees the pressure on yields easing, with no more than 60 planes being added by all airlines put together.
Last November, regulator Directorate General of Civil Aviation (DGCA) asked IndiGo to replace Pratt & Whitney engines on its fleet of almost 100 Airbus A320 and A321neo aircraft by January 31. Analysts see this deadline forcing the airline to cancel flights and reduce capacity for at least two quarters. IndiGo has already lowered its capacity growth projections for 2019-20 from 30 per cent to 25 per cent, and it hopes to maintain the same level next financial year, too.
Boeing suspended production of 737 Max planes last December, making SpiceJet’s expansion programme uncertain. Awaiting a word on new deliveries, the airline has had to ground 17 of these aircraft.
AirAsia India, the Tata group’s joint venture with Malaysia’s AirAsia, which was earlier considering doubling its fleet to 40, now seems to have scaled back.
The good, the bad, and what might lie ahead
Airlines also hope to get a relief from the government, like the two-year moratorium on payment of pending spectrum dues given to telecom companies. They are also pushing for ATF’s inclusion in the list of items on which Goods and Services Tax (GST) is levied. If that happens, airlines’ operating cost would come down by 10 per cent.
What does the different carriers’ future look like in 2020?
IndiGo: Despite its grounded planes and uncertainty over P&W engines, IndiGo is expected to relentlessly push for capacity and market share. Irrespective of consolidation, the airline should be able to increase its market share beyond 50 per cent this year.
In August 2019, IndiGo quietly overtook Air India to become the largest Indian carrier in terms of international seats deployed. As much as 30 per cent of its additional seat capacity in the first half of 2019-20 was for the international market. However, its foray into mid-distance routes like Istanbul, and new routes like Vietnam’s Ho Chi Minh City and China’s Chengdu, has had a mixed result. This year, IndiGo, which flies only narrow-bodied aircraft on international routes at present, will induct wide-bodied aircraft and also start mid-haul flights.
SpiceJet: India’s second-largest airline, which overtook IndiGo in adding seats in the first half of 2019, SpiceJet has looked to grab the opportunity created by Jet’s closure. It leased more than 30 Boeing 737 planes that Jet Airways operated previously — to make up for its grounded Max planes — and got valuable slots at saturated airports like Mumbai. But inducting Jet’s planes also increased its cost of operations, as Max planes were more fuel-efficient. That, according to analysts, has been showing in SpiceJet’s growing losses.
SpiceJet will have to relook at its fleet portfolio in 2020, considering the suspension of Max planes by Boeing. The airline is reportedly in talks with Airbus, but it has not placed any orders yet. It has denied reports that it is looking to raise over Rs 750 crore via qualified institutional placement (QIP) of shares in order to tide over its financial pressure.
Vistara: The Tata group, which runs AirAsia India as an LCC, is accelerating the expansion of its other airline, Vistara, which is a full service carrier. It plans to double Vistara’s fleet of over 40 planes in FY20 to boost its international business. Vistara will get two wide-bodied aircraft by March 2020. That will enable its entry into long-haul and mid-haul markets, where it will have no local competition if you discount the tottering Air India.
AirAsia India: The Tata group has held back the expansion of AirAsia India, especially as the government has not permitted it to fly overseas despite meeting the condition of a 20-aircraft fleet. However, Tatas’ cautious approach might change as they take over more operational control of the airline from partner Air Asia. The group’s strategy for the domestic aviation market needs ironing out, say experts. “Sometimes, the two airlines (AirAsia and Vistara) are seen competing with each other in in pricing, despite their costs being different. There has been no attempt to build a synergy; there is room for some cost reduction, since both have A320 aircraft,” says an aviation expert.
Air India’s fate
A much-awaited event for the aviation industry this year will be the proposed privatisation of Air India. The national carrier was unable to leverage the closure of Jet, as 26 of its aircraft were grounded, and it had no money for maintenance checks. Capa has increased its estimates for Air India’s 2019-20 losses to $600 million from $150 million earlier.
The government has agreed to halve Air India’s total debt to Rs 28,000 crore — a large portion of that aircraft loans — by transferring some of it to a separate company. The government has also decided to fully exit the carrier and allow a new buyer to cut its workforce.
But will anyone want to buy Air India? The decision will depend on two factors, say prospective bidders. First, the reserve price that the government sets for bidders. And second, whether or not the investor will be ring-fenced against past dues, legal cases, and other potential disruptions, with a legal framework. Even so, given its shrinking market share and financial losses, selling Air India is not going to be easy for the government.

Over 92,000 employees of BSNL, MTNL opt for voluntary retirement scheme

Over 92,000 employees of state-run BSNL and MTNL have so far opted for the recently announced VRS , according to a government source.
The source said the scheme and the strong response it has generated marks the biggest milestone in the history of these state-owned corporations.

Over 92,000 employees of BSNL and MTNL have opted for the scheme so far, the source added.
Nearly 100,000 BSNL employees are eligible for the Voluntary Retirement Scheme (VRS) out of its total staff strength of about 150,000. The effective date of voluntary retirement under the present scheme is January 31, 2020.
The 'BSNL Voluntary Retirement Scheme - 2019', that was rolled out recently, will remain open till December 3. BSNL is looking at savings of about Rs 7,000 crore in wage bill, if 70,000-80,000 personnel opt for the scheme.
According to the plan, all regular and permanent employees of BSNL including those on deputation to other organisations or posted outside the corporation on deputation basis, who attended the age of 50 years or above are eligible to seek voluntary retirement under the scheme.
The amount of ex-gratia for any eligible employee will be equal to 35 days salary for each completed year of service and 25 days salary for every year of service left until superannuation.
Mahanagar Telephone Nigam Ltd (MTNL) too has rolled out a VRS for its employees. The scheme, based on Gujarat Model, will be open for employees till December 3, 2019.
The Union Cabinet had last month approved a plan to combine MTNL - which provides services in Mumbai and New Delhi - with BSNL that services the rest of the nation.
The rescue package approved by the government includes infusion of Rs 20,140 crore for purchase of 4G spectrum, Rs 3,674 crore for GST to be paid on spectrum allocation, companies raising Rs 15,000 crore in debt on the sovereign guarantee and government funding Rs 17,160 crore VRS and another Rs 12,768 crore towards retirement liability.
The two firms will also monetise assets worth Rs 37,500 crore in the next three years. MTNL has reported losses in nine of the past 10 years and BSNL too has been ringing in loss since 2010. The total debt on both companies stood at Rs 40,000 crore, of which half of the liability is on MTNL alone.

BSNL, MTNL vendors mull insolvency action against telcos over pending dues

Some vendors of BSNL and MTNL are mulling to move insolvency pleas against the state-run firms for non-payment of dues, estimated to be around Rs 20,000 crore, a senior industry body executive said on Monday.
The pending payments are against the supply of telecom gear and other goods to BSNL and MTNL as well as Rs 45,000-crore rural broadband project BharatNet, PHD Chamber of Commerce Telecom Committee chairman Sandeep Aggarwal told PTI.

"The total pending payment of BSNL and MTNL vendors is around Rs 20,000 crore. Banks have started putting pressure on vendors to clear their dues. All vendors will jointly stage a protest on November 19. If payments are not made within 10 days thereafter, they will approach NCLT for liquidation of BSNL and MTNL," Aggarwal claimed.
Email queries sent to BSNL and MTNL over the pending dues of vendors remained unanswered till the filing of the story.
The Telecom Export Promotion Council on October 31, 2019, wrote to the administrator of Universal Service Obligation Fund (USOF) to pay long-pending dues of around Rs 2,000 crore to various vendors. USOF manages the BharatNet project.
ALSO READ: Employee unions of BSNL, MTNL meet Prasad, back govt's relief plan
These vendors include Sterlite Technologies (Rs 500 crore due), Tejas Networks (Rs 314 crore), HFCL (Rs 219 crore), Paramount Wires and Cables (Rs 168 crore), VNL (Rs 150 crore) etc, according to the letter. In a letter to telecom minister Ravi Shankar Prasad, Paramount said its bankers are pressuring the company to clear their dues at the earliest.
"Our plant has remained mostly shut, since we do not have funds to buy raw materials. Creditors are refusing to supply even at high prices. Our staff and worker salaries have not been paid for the last two months. This has never happened in our history," Paramount said.
Last month, the Cabinet approved a Rs 69,000-crore revival plan for BSNL and MTNL but dues of many vendors are still unpaid. Aggarwal said that around 1 lakh direct employment are affected due to non-payment of dues by government-run firms.
"With Rs 20,000 crore payment due, around 1 crore manhours salary has not been paid," he said.

Staff salaries due for 2 months, trying to fix issue soon: MTNL CMD

Cash-strapped MTNL has not been able to pay staff wages for July and August and is making a sincere effort to release at least a portion of the dues at the earliest, a top company official said.
"Salary payment for two months...July and August are pending, we have cleared it (wages) till June," said Sunil Kumar, who recently assumed additional charge as chairman and managing director of Mahanagar Telephone Nigam Ltd (MTNL).

He declined to give a timeframe for clearing the outstanding salaries, but said, "We are trying sincerely to release at least one month's salary at the earliest".
Asked how the ailing state-owned entity intends to meet its salary obligations, he said MTNL is looking to pay it from accumulated revenue.
"The deadline for us was as of yesterday....We are sincerely considering whatever is possible, and to do it as early as possible. We cannot give any timeframe but we are trying very hard," he told PTI.
Distressed telecom PSUs MTNL and Bharat Sanchar Nigam Ltd (BSNL) have been incurring losses and have been facing problems in clearing staff salaries on time in the recent past.
The loss-making telecom firms have approached the Telecom Department for immediate help as they are facing financial stress, which has aggravated due to the tariff war triggered by the entry of Reliance Jio. A revival plan for the telecom firms is under consideration.
The employee cost of BSNL is 75.06 per cent and that of MTNL is 87.15 per cent of their total income, while the same for private telecom companies varies between 2.9 to 5 per cent.
According to data shared in the Lok Sabha in June this year, the market share of MTNL in the two circles where it operates (Mumbai and Delhi) has declined to 6.95 per cent at the end of 2018-19 from 7.37 per cent in 2016-17.

Govt to address telecom stress, revive BSNL, MTNL: Ravi Shankar Prasad

Addressing financial stress in the telecom sector after the upcoming spectrum auction, the revival of Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) with “least pressure” on the government, and ensuring “fair competition” will be priority for Telecom and IT Minister Ravi Shankar Prasad.
This is besides establishing India as the manufacturing and export hub of electronics.

The sector has been going through stress for a long time, the minister said, adding that he would meet top telecom companies very soon.
The Union government has set up a panel headed by Telecom Secretary Aruna Sundararajan to look at rationalisation and remove ambiguities in ease of doing business.
The panel will revisit spectrum usage charges and the report is expected in two weeks.
If the issues require legal clarity, the matter will go to the Solicitor General of India. Attorney General K K Venugopal has appeared for telecom companies in the past.
On MTNL and BSNL, he said: “We will make a focused attempt on the revival of BSNL and MTNL and will move a Cabinet note on that very soon. The details are being worked out.”
He listed three reasons for making these initiatives — they (BSNL and MTNL) are national assets, they operate in strategic areas like home and defence, and in the case of cyclone, flood, or earthquake they are in the forefront of giving free services.
However, the minister asked the employees of the two debt-laden companies to brace themselves for competition.
“I am urging the employees of BSNL and MTNL to be cooperative and professional, and learn to live in today’s competitive world. Our government supports competition because it has brought in cheapest mobile rates and cheapest data in the world.
Therefore, while acknowledging some disruption, we need to acknowledge the benefits that have happened due to competition,” he added.
Prasad said, “India has made a mark in electronic manufacturing...I want India to become the export house of electronic manufacturing … that is something I want to follow in Narendra Modi government II.”

Govt agrees to bail out BSNL and MTNL; PMO seeks revival plan: Report

The Prime Minister's Office (PMO) has in principle agreed to bail out state-owned telecom firms MTNL and BSNL by addressing three issues.
The PMO, in a meeting with telecom and finance ministries and Niti Ayog a few days ago, asked the department of telecom (DoT) to make a plan for allocating the firms 4G spectrum, grant them immediate financial aid and frame a voluntary retirement scheme for employees, according to an official source.

"The government has taken a decision that both MTNL and BSNL have to be revived and sustained in a healthy manner. (A) senior officer from PMO held a meeting with DoT, finance ministry and Niti Aayog in which it has been decided that DoT will submit a detailed roadmap at the earliest to concerned authorities for the revival of MTNL and BSNL," the source told PTI.
Both companies have also sought spectrum for 4G services through equity infusion from the government. BSNL, which has the lowest debt--of Rs 14,000 crore--among all telecom operators, has sought 4G spectrum across India through equity infusion of Rs 7,000 crore. The total spectrum will cost the firm Rs 14,000 crore.
The PSUs have been also ailing because of high revenue-to-debt ratio due to a high number of government employees that were transferred by the Department of Telecom to them at the time of their formation. BSNL has 1.76 lakh employees across India and MTNL has 22,000 employees.
MTNL has sought a refund of interest that it paid for broadband wireless access spectrum which it was given by the government and asked to pay the price that was determined in auctions held in 2010.
Both state-run telecom firms have asked for permissions to monetise their land assets as well as the voluntary retirement scheme for employees on the Gujarat model. Under the Gujarat model, an amount equivalent to 35 days of salary for each completed year of service, and 25 days of salary for each year of service left till retirement is offered.
The VRS scheme for BSNL and MTNL will have a revenue impact of Rs 6,365 crore and Rs 2,120 crore.
The revenue-to-wage ratio in case of MTNL has swelled to 90 per cent while in the case of BSNL it is around 60-70 per cent. The DoT has recommended that VRS of both PSUs should be funded through a 10-year bond issue and the bonds should be paid back by lease revenue that they will get from land asset monetisation.
"In the meeting it was decided to help MTNL and BSNL in raising capital and operational expenditure. There is a proposal of asset monetisation and there is also option of loans though sovereign guarantee. DoT has been asked to work on the best suited action that needs to be taken," the source said.