The Union Cabinet approved on Tuesday the hiving off mobile tower assets of Bharat Sanchar Nigam Limited (BSNL) into a separate company which will be fully-owned by BSNL.
The Cabinet note was first floated in 2015.
The Cabinet authorises BSNL to monetise its telecom tower infrastructure with the formation of a separate subsidiary company.
The company has about 70,000 towers, out of which 50,000 towers have optic fibre connectivity. Over 66,000 has been transferred into the new entity. They still have some towers left which will be used for the day-to-day functioning and tenancy.
The entire business is going to be hived off completely but the tenancy will continue with BSNL.
However, whether or not, BSNL will fine suitable buyers only time will reveal because even though BSNL initiated this conversation about 2-3 years ago, they haven't found any buyers yet.
"An independent and dedicated tower company of BSNL with a focused approach will lead to rise in external tenancies and higher revenue for the new company," according to a government statement.
They have about 18.1% market share in terms of the valuation. The valuation last reported in 2016 was 3 billion dollar.
"It should have been done much earlier but it is a welcome move for BSNL. Valuation must not change much, it at all it would have increased since it started in 2012. BSNL will be able to monetise tower assest," R K Upadhyay, Former CMD BSNL said.
Anupam Shrivastava, CMD of BSNL had earlier told CNBC-TV18 that they will look at a majority stake sale but will probably try to retail. Thus, BSNL will have a majority stake in the new entity. And then they will look at either bringing in a telecom player or a private equity player.
The move will help BSNL bring down its debt to be able to expand their capacity as they have been looking at the possibility of hiving off the towers business, unlocking values, bringing in investments to enable to scale up.
Nevertheless, Sanjay Kapoor, Former CEO of Bharti Airtel is not convinced id it is the right time. "Despite having marginal towers as they have towers where other private operators and tower service companies do not have accesses, that have value, it also depends on whether the towers are built for multi-tenancies," Kapoor added.Also, in the last three years, company's financial figures has not moved much. The company saw a year-on-year saw loss of about Rs 7,000 crore rupees and around Rs 2000-2500 crore coming from tower business. Thus the valuation in terms of business has been very low.