BSNL has cash reserves of about Rs 35,000 crores and is hence planning to enter the PE business to focus on tech startups. The company seems to gets first preference when auctioning of spectrum and 3G services are concerned, which in my opinion is unfair in India's already cut-throat telecom market.
An interesting point in the news article was that in 2007-08 the profit was driven by interest income, yes, you read that right, interest income on its bank deposits. The profit was about Rs 300 crores and the interest income was about Rs 4000 crores! Thus there is also apprehension that if the reserves are used to set up a PE business the company will have to forego the interest it has been earning. Now should a telecom firm actually be earning its profits through interest? There used to be something called the Access Deficit Charge (ADC) that used to be levied on private telecom players in India. This I believe was replaced by the Universal Service Obligation (USO). From what I remember this was paid to the government in order to compensate BSNL for its non-profitable rural operations. It being a public sector company, BSNL had to provide telecom services in rural areas but was incurring losses on them.
I do not know what the current situation is or if this is indeed the major reason for the profits or losses BSNL shows. But I think the telco can try other avenues to make profits other than the interest route. Let us see what happens.
An interesting point in the news article was that in 2007-08 the profit was driven by interest income, yes, you read that right, interest income on its bank deposits. The profit was about Rs 300 crores and the interest income was about Rs 4000 crores! Thus there is also apprehension that if the reserves are used to set up a PE business the company will have to forego the interest it has been earning. Now should a telecom firm actually be earning its profits through interest? There used to be something called the Access Deficit Charge (ADC) that used to be levied on private telecom players in India. This I believe was replaced by the Universal Service Obligation (USO). From what I remember this was paid to the government in order to compensate BSNL for its non-profitable rural operations. It being a public sector company, BSNL had to provide telecom services in rural areas but was incurring losses on them.
I do not know what the current situation is or if this is indeed the major reason for the profits or losses BSNL shows. But I think the telco can try other avenues to make profits other than the interest route. Let us see what happens.
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