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Friday, 10 May 2013 00:00
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Can’t revive MTNL if its wages exceed its revenues


The best thing that the Group of Ministers (GoM) set up to discuss the revival of ailing telecom PSUs MTNL and BSNL can do is to summarily reject the note put up by the DoT. Because other than a string of excuses and non-solutions, the DoT has no real turnaround strategy for the PSUs. And that’s hardly surprising given that, as compared to the industry average of 5%, MTNL’s wage payments are more than its revenues—BSNL is better in comparison but its wages add up to a whopping 49% of turnover. Over the last three years, not surprisingly, BSNL’s losses have risen 4.5 times, from R1,823 crore in to R8,198 crore in FY13. In the case of MTNL, losses rose from R2,611 crore in FY10 to a likely R4,500 crore in FY13—by the end of next month, MTNL is likely to have completely eroded its net worth. Not surprising, given that only around half the subscriber base of the PSUs—103 million mobile users for BSNL and 5 million for MTNL—actually use their phones.

One of the solutions offered by the DoT is that the 10-million-odd people working for PSUs and the government be asked to move to MTNL/BSNL mobiles—even assuming they do, how will that improve things considering both PSUs can get in more customers by simply offering better service quality. Treat the two PSUs as one, comes another suggestion, so that MTNL doesn’t have to pay interconnection usage charges (IUC) to BSNL—apart from the fact that this is not possible given the two are separate entities, all that this would do is to save expenses for MTNL while reducing earnings for BSNL. There are, expectedly, suggestions to lower wage costs through generous VRS—since a separate note is to be given on this, no estimates are available on how much it will cost—and even refunding the licence fees paid by the PSUs for the 3G and broadband licences they got close to two years before their private sector counterparts got them. Between the two—they paid the licence fee after two years of having got the spectrum—that’s around R30,000 crore. While the DoT is now arguing the PSUs didn’t not want to buy the BWA spectrum—for which they paid R12,847 crore—this is the best example of why the bail-out package for the PSU telcos is a waste of money. If they could be forced to take on a liability without even a business case being established, there is little to suggest they will be allowed to function in the future. The DoT has told the GoM that things will be different and that, in the case of BSNL, several of the suggestions made by the Sam Pitroda committee will be implemented.

A look at the annexure that lists how BSNL has implemented the recommendations is instructive. The first one about hiring professionals is explained away by saying the Telecom Commission decided it was not feasible as other PSUs would want to do the same. The proposal to offer VRS to a third of the staff is “being examined”; divesting 30% equity to a strategic investor and through an IPO was rejected due to the timing not being right; allowing private sector players to offer broadband services on BSNL’s network on a revenue-share is “to be decided”. Since the government is unlikely to let the PSUs die, and doesn’t have the funds to fund the waste, chances are we’ll get an Air-India-style promise of funds infusion over the next 5-10 years.


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