BBNL-BSNL merger

In this month, the merger of Bharat Broadband Network Limited (BBNL) and Bharat Sanchar Nigam Limited (BSNL) will be completed.

Overview:

  • The decision to merge BBNL and BSNL had already been taken by the government and this process was scheduled to be completed before 31st March.
  • The government has plans to infuse funds of around Rs 1.6 trillion, of which Rs 36,260 crore would be cash support for BSNL over a period of the next three years.
  • As of January 31, BSNL/MTNL had a combined debt of Rs 59,588 crore.
  • The organizations’ AGR (adjusted gross revenue) dues (spectrum usage charges and licencing fee) are currently Rs 43,148 crore.
  • For both BSNL and MTNL, the government is thinking of converting AGR dues into equity.
  • If BBNL and BSNL merge, the latter’s 860,000 km of optic fibre, combined with BBNL’s 560,000 km, can create a 1.42-million-kilometre integrated fibre network. When combined with BSNL’s enormous market presence across the country, this can provide rural areas with last-mile connectivity.
  • The government thinks that once the merger is completed, the new entity will be able to focus more effectively and cohesively on pan-India 4G wireless services, fixed-line fibre internet services, and enterprise services.

About BBNL

BBNL is a special purpose vehicle (SPV) that falls under the ambit of the Ministry of Communications and in 2012 it was incorporated as a public sector unit. The task of implementing the BharatNet project, which was till then known as the National Optical Fibre Network (NOFN), was handed over to this organization. The SPV is funded by the Universal Service Obligation Fund (USOF), which is financed by a Universal Access Levy (UAL) that all telecom licensees must pay. On April 1, 2002, this came into effect and required all telecom service providers to pay the USOF a portion of their revenue.

How does the USOF receive funding?

Telecom service providers are required to pay an 8% license fee on their income from the selling of telecom services, with 5% going to the USOF, according to telecom licence agreements. With the merger of BBNL and BSNL, this fund which now stands at close to Rs 60,000 crore is likely to be transferred to BSNL, which will help the organization during its ongoing financial difficulties.

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