State-owned Bharat Sanchar Nigam, better known as BSNL, once dominated India’s telecom sector but is now gasping for breath.
The ailing company has written to the government asking for immediate funding to continue operations, including to pay Rs 850 crore worth of salaries in June.
“The gap between monthly revenues and bare expenses ... has reached a level where continuing with operations would be nearly impossible without immediate infusion of adequate equity,” Puran Chandra, senior general manager at BSNL’s corporate budget and banking division, stated in a letter to the joint secretary of India’s telecom ministry who also sits on the board of BSNL, reported the Times of India on June 25.
The distressed telecom, saddled with a massive Rs 13,000 crore debt, has been facing problems in clearing staff salaries. The issue came to light in March, when BSNL defaulted on payments of monthly salaries to around 1.76 lakh employees.
So bad is the crunch there have been reported power cuts in many BSNL offices, and around 20% supply of power to its telecom towers is being disrupted.
What’s ailing BSNL?
The key reason for BSNL’s downward spiral is intense competition with private players like Reliance Jio and Bharti Airtel.
Revenues in 2017-’18, stood at Rs 27,818 crore, down 14% from the previous year. Losses, too, widened from Rs 4,500 crore in 2016-’17 to Rs 7,992 crore in 2017-’18. Accumulated operating losses were over Rs 90,000 crore at the end of December 2018, making it one of India’s top loss-making firms, a recent report by Kotak Institutional Equities said.
The firm is also bogged down by poor management, high employee costs and delayed modernisation.
Reliance Jio, Bharti Airtel and Vodafone Idea together account for 80% of the sector’s spectrum holdings. At a time when the government is working on 5G auctions, BSNL is yet to roll out 4G services.
Then there’s the issue of over-staffing. BSNL employs 1.8 lakh people, six times the average 25,000 to 30,000 headcount of rivals. To cut costs, the company froze employee benefits in February this year. In 2018, BSNL had saved Rs 2,500 crore through a similar exercise.
With falling profitability, BSNL is looking to find new ways of staying afloat by saving costs and finding new sources of revenue.
Distress calls
In 2016, the government think tank NITI Aayog added BSNL to the list of loss-making Public Sector Undertakings. It had also proposed the closure of BSNL.
However, the government is reportedly set to announce a revival package soon. Earlier, an association of engineers and account professionals at BSNL had sought Prime Minister Narendra Modi’s intervention on this matter. The All India Graduate Engineers and Telecom Officers Association, in a letter dated June 18, urged Modi to provide budgetary support to BSNL.
This article first appeared on Quartz India.
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