BSNL Going Through Tough Phase, Nearly Impossible To Run Operations

The state- owned BSNL has sent an SOS to the government in order to seek immediate cash infusion as it is finding it “nearly impossible” to continue operations and even manage Rs 850 crore salary liability for June as outstanding liabilities of nearly Rs 13,000 crore have made its business “unsustainable”.

“The gap between monthly revenues and bare expenses to continue operations as a going concern has reached to a level where continuing with the BSNL operations would be nearly impossible without immediate infusion of adequate equity,” Puran Chandra, senior general manager at BSNL’s corporate budget and banking division, said in a letter to the joint secretary in the telecom ministry (who also sits on the board of BSNL).

In the letter, sent last week, the public-sector company has sought the government’s advice on the next “course of action” for deciding the fate of the ailing corporation.

BSNL is the country’s top loss-making PSU and according to a report by Kotak Institutional Equities, BSNL’s accumulated operating loss crossed Rs 90,000 crore at the end of December, 2018.

Despite talks of restructuring, the government has failed to provide any revival road map and even dismissed suggestions of closing it down, citing the company’s “strategic” importance.

The corporation has been on a downward spiral for the last many years, bogged down by excessively high employee costs, poor management functioning, unwanted and often misdirected government interference, and delays in modernisation plans (it still does not have 4G spectrum when the government is now working on 5G auctions).

The company’s mobile subscriber market share has nearly halved since 2004-05 and is at around 10% at present. Of its subscribers, many are low-paying customers against the high ARPU (average revenue per user) subscribers bagged by private operators such as Reliance Jio, Airtel and Vodafone-Idea.

Prime Minister Narendra Modi had taken stock of the BSNL’s ailing condition a few months back, and a presentation was made by BSNL’s chairman. However, no clear solution has emerged as how the company — with a manpower of nearly 1.7 lakh — will survive.

In fact, employee salaries and benefits are one of the biggest drain that the company faces. Employee expenses, including retirement benefit accruals, were estimated at 66% of BSNL’s operating revenues in FY18 versus 21% in FY2006. Airtel spent only around 3% of its revenues on personnel expenditure.

The creditors and suppliers to the company are also in trouble, saying there are huge outstandings. “BSNL just doesn’t pay. It is a task to recover our dues,” one of the suppliers said.

B K Syngal, former chairman of VSNL and a telecom industry analyst, says it is “better to shut down” BSNL if the governance in the company does not improve. “MTNL is already dead, and BSNL is now in the ICU. It has been a systematic destruction of PSUs by an overreach of the government. They don’t want to let go of their fiefdom,” Syngal said. “How can a person swim with hands and feet tied?”

Biz, Business, Telecom