New Delhi: The union cabinet approved a proposal to separate Bharat Sanchar Nigam Ltd’s (BSNL) mobile tower assets into a new unit, a move that will potentially generate revenues and improve finances of the state-run telecom firm.

“This approval authorizes BSNL to monetize its telecom tower infrastructure," the government said in a statement on Tuesday.

BSNL owns more than 66,000 mobile towers in India, almost 15% of the around 442,000 mobile towers in the country.

“An independent, dedicated tower company of BSNL with a focused approach will lead to increasing of external tenancies (or number of companies using a tower) and consequentially higher revenue for the new company," the government said.

Telecom minister Manoj Sinha said that the move emulated the actions of private telecom firms.

“Telecom tower industry is becoming a big business. Private telecom service operators have been doing this through separate tower companies. Today, cabinet has given a right to BSNL to make a similar kind of separate tower company," Sinha said.

Sinha added that the process will be completed in two years.

“We have a tenancy ratio of 1.14% while the others have 1.9%. With this the tenancy ratio will increase for us. More than 1,600 BSNL employees are expected to go on deputation for this," Sinha said.

Anupam Shrivastava, chairman and managing director of BSNL, did not respond to phone calls or text messages seeking comments.

The mobile tower industry has emerged as an independent business to harness the potential for sharing of infrastructure. The business model arose from the need to achieve economies of scale and to reduce capital investment costs for providing mobile services.

“Having the towers hived off creates greater flexibility in terms of renting space on them to a large number of other players. Plus, from a licence fee perspective, you are also able to reduce your liabilities," said Mahesh Uppal, director of telecom consulting firm Comfirst.

A tower infrastructure company essentially leases it to telecom service providers, enabling them to minimize duplication of investments and economize on costs of operation and maintenance, thereby improving profitability.

Bharti Infratel Ltd, a unit of India’s largest telecom services provider Bharti Airtel Ltd, is responsible for building the telecom towers. It is the largest of the operator-owned tower companies in India with a 42% economic interest in Indus Towers Ltd, India’s largest tower company.

Airtel in March sold a 10.3% stake in Bharti Infratel to raise Rs6,200 crore and later in August, it sold an additional 3.65% stake to generate Rs2,570 crore.

The money raised was used to pare debt and combat competition from Mukesh Ambani-promoted Reliance Jio Infocomm Ltd.

Reliance Jio’s rise has sparked consolidation in the Indian market and experts say that only four companies, including BSNL, are likely to survive in the long term. Amid the changing industry scenario, the state-run telecom firm’s role is extremely important to maintain a balance in the market and cater to the governmental’s needs to promote the Digital India campaign.

BSNL has debt of Rs3,200 crore and revenue of Rs30,000 crore, the least in the industry.

Mayank Aggarwal and Nikita Doval contributed to this story.