Even as the new government led by the National Democratic Alliance focuses on reviving loss-making Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Nigam Limited (MTNL), a Credit Suisse report on the Indian telecom sector underlines that a strong state-backed competitor is not good for the private sector telecom operators.

According to global financial services company, both the state-owned operators (BSNL and MTNL) have access to the second largest spectrum market share after Bharti Airtel, and they can differentiate themselves if they get their act together. Further, Credit Suisse points out that any major turnaround in the performance of the two operators will require infusion of capital and overcoming a number of challenges.

MTNL and BSNL have been posting losses for the last few years and losing subscribers to private operators. In 2012-13, MTNL recorded a net loss of Rs 53.21 billion on annual revenue of Rs 34.28 billion. Meanwhile, BSNL’s losses as per unaudited results, stood at Rs 81.98 in 2012-13. The operator has been posting losses since 2009-10. In fact, BSNL’s profits started declining after 2004-05, when its earnings stood at Rs 101.83 billion.

Ravi Shankar Prasad, the new Minister of Telecommunications and IT has recently spelt out his priorities for the telecom sector which includes revival of BSNL and MTNL, fasttracking the process of providing broadband connectivity to 250,000 gram panchayats and developing India as a global electronic manufacturing hub.

Prasad has stated that improving the performance of loss making state-owned operators is a priority for him. He has decided to play a pro-active role in monitoring the functioning of both the operators, for which a network operations centre will be set up in Sanchar Bhawan.

Besides, taking a critical view of the government’s effort of reviving BSNL and MTNL, Credit Suisse has termed the government’s broadband project for connecting village panchayats as a positive step for the telecom industry. According to the agency, if the project starts now, the benefits should start accruing within a year’s time. With fibre sharing now gaining acceptance within the industry, the telecom players would have anyway gone ahead with their own shared fibre installation.