Fixing BSNL requires surgery and smart thinking
Telecom minister Ravi Shankar Prasad is confident of turning around the chronically loss-making BSNL—its losses have jumped from R1,823 crore in FY10 to R8,198 crore in FY13, with a lower R7,085 crore in FY14—in the same manner, he says, that he turned around Coal India Limited (CIL) when he headed the coal ministry in the Vajpayee government 15 years ago. While few doubt the government’s resolve, or Prasad’s ability, there is a vital difference between CIL and BSNL. The former is a monopoly, so a price hike of the type brought about by an e-auction is an easy revenue generator; the same is not possible in a hyper-competitive telecom sector where, despite BSNL’s lower tariffs, subscribers are deserting it by the droves—this is why, at a time when revenues of its competitors are rising, BSNL’s revenues have fallen from R32,045 crore in FY10 to R27,000 crore in FY14. Things get more complicated when you look at other drivers of profitability. BSNL’s salary bill is around 49% of its turnover as compared to around 5% for private sector competitors like Bharti Airtel, Vodafone and Idea.
If BSNL is to be turned around despite this, it will require both courage as well as sound business sense since, if this is to happen, BSNL needs to be completely rewired. Prasad’s 24x7 monitoring of BSNL’s progress is a good idea, but if the PSU needs to get to Airtel’s level of profitability—using the salary metric only—it needs to hike its turnover 10 times over. Since this is not going to be possible, a fairly large part of BSNL’s 2.5 lakh employees will have to be given a VRS. While this was tried, without success in the case of Air India, BSNL will have to monetise its assets—perhaps the VRS can even be funded from this. While MTNL whose losses rose from R2,611 crore in FY10 to R5,321 crore in FY13 has around 2,30,000 square feet of commercial land and 3,80,000 square feet of residential land, BSNL has even larger tracts that can be monetised. It also makes sense to hive off BSNL’s mobile phone towers into a separate company that can either be listed or sold off. Neither will yield results in a hurry, but with a 3-4 year time frame, the results can be large.
And instead of challenging the TDSAT order which allowed intra-circle roaming in 3G spectrum—a move that is sending jitters down the collective spines of the private telecom players—Prasad should see that as a heaven-sent opportunity. Between MTNL and BSNL, they are the only two that have spectrum across the country—so given how few 3G subscribers they have, spectrum sharing with private firms offers a steady revenue model. Given how data-hungry the country is, BSNL’s 20 million landlines offer great potential for conversion to broadband, but since this needs to be done fast, using third-party vendors is probably a better idea than employing BSNL’s own employees. Thought should, similarly, be given to moving away from BSNL’s current system of operating their networks, as the Pitroda committee suggested, using third-party vendors to manage networks like Bharti does. In other words, business as usual isn’t going to help BSNL, only radical surgery and re-engineering will.