The government of India on Tuesday approved the Bharat Sanchar Nigam Ltd (BSNL) plan to separate its mobile tower assets into a new unit. The processes will be completed in two years, Mint reported.

The government believes the move will help the state-run telecom firm generate revenues and improve finances. The firm has been incurring losses for seven years, with an accumulated deficit of about Rs 36,000 crore.

"This approval authorises BSNL to monetise its telecom tower infrastructure. 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 Union Cabinet said in a statement about the government nod.

BSNL currently has more than 66,000 mobile towers across India, which roughly constitutes 15 percent of the total mobile towers in India.

Union Telecom Minister Manoj Sinha said the present telecom landscape and the strategies adopted by the private players pushed the government to adopt this plan.

"The 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," Mint quoted the minister as saying.

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

Over a period the mobile tower business has evolved as an independent business to leverage the potential for sharing of infrastructure.

A tower infrastructure company typically leases towers to telecom service providers while economising on costs of operation, thereby improving profitability, the business daily said.

Logo of Bharat Sanchar Nigam Ltd (BSNL) painted on a wall outside its office in Kolkata
A woman speaks on her mobile phone in front of the logo of Bharat Sanchar Nigam Ltd (BSNL) painted on a wall outside its office in Kolkata, India, August 24, 2017. Picture taken August 24, 2017.REUTERS/Rupak De Chowdhuri

"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," the business daily quoted Mahesh Uppal, director of telecom consulting firm Comfirst, as saying.

India's largest telecom service provider Bharti Airtel has in March sold 10.3 percent stake in its mobile tower company — also India's largest — Bharti Infratel. It sold another 3.665 percent stake in August.

Price wars, stiff competition and consolidation in the telecom industry were triggered with Reliance Jio entering the telecom space.

Vodafone Group's Indian unit and Idea Cellular merged operations earlier this year, which pushed matters further along.

Bharti Aritel has also taken over the operations of Norwegian telecom company Telenor in six Indian states.