Sunday, December 26, 2010

BSNL Approaching a point of no return

In the current fiscal BSNL made an estimated loss of 6000 crore. This tragic story is for a company which made 10,183 crore profit in 2004-05. This tragic business saga not only forced the government to put the dis investments for BSNL on cold shelf but also raising serious questions about running and financial conditions of various PSUs (Especially in the background of Niira Radia tapes). We certainly don't want BSNL to go in to Air India's way, but if we are not ready to address the problems and flows in BSNL now, it may have a cumulative effect not only in BSNL but also in many other government companies with are on downward spiral, including the Railways.

Look at the performance of BSNL in last few years. The company made a profit of 10,183.29 crore in 2004-05, profit reduced to 8939.69 crore in 2005-06, then to 7805.87 crore in 2006-07 and more than halved to 3009.39 crore in 2007-08, and a disastrous reduction to 574.85crore in 2008-09. And this year...

In the last years BSNL made some profit mainly from the income of her enormous cash reserves; even that reserve is declining. Reserves fell to 35,337 crore from 40,000 a year ago; if BSNL and MTNL are forced to pay for the 3G spectrum they are holding in the current market rates, then this reserve will evaporate with in no time.

According to Economic Times report in August 2009, "Top BSNL executives speaking on condition of anonymity say the company has been severely hobbled by political interference. It ran out of capacity to expand cellular services nearly 18 months ago and no new major contracts for mobile networks and equipment have been awarded in the past 24 months.

One of the executives pointed out that in 2006 and 2007, the company matched India’s biggest and most valuable phone firm 'Bharti Airtel' in subscriber additions, but meddling since then had resulted in growth stagnating. “BSNL has hardly any capacity addition since 2006-07 and this reflects in our performance,” the executive said."

How far BSNL gone from here? If the TRAI figures are to be believed then BSNL is still suffering in terms of number of consumers too. According to the latest TRAI figures, TTSL overtook BSNL to reach the 4th position. Now this state-owned behemoth which has unmatched capacity both in terms of trained human resources and technical know-how as compared to the rivals now pushed to 5th place in Indian cellular space.

Unlike many other PSU companies, this losses are critical to BSNL. Departments like Railways and a good number of other PSU's may be saved due to the tags of 'National Security', 'Critical for the benefit of People', 'Social Security' etc. But BSNL may not be able to claim these tags as people or government are not critically depend on BSNL for her services. And private sector have more customer base than that or BSNL in cellular space. So it is important for BSNL to find out a way to raise from this crisis, no matter how difficult that actions are.

First of all BSNL should be separated from Telecom Department and ministry, people in BSNL's top level management should be part of the company. If some one want to remain in telecom department let them do so. The next step may be to absorb efficient people from market or internally and pay them in market rates. Use the external financial service companies to restructure the company (Please don't play politics here). Once it showed some improvements, government have to dilute her stake in BSNL both to public and employees and list the company in stock exchange. This process fill force BSNL management to worry about their balance sheets and company will be subjected to all type of SEBI requirements.

As BSNL have to face the customer every day, their operations should be customer centric. They have to understand that no one like to pay extra 200-300 to BSNL employees for their each and every services (like new telephone connection, moving one telephone from one location to another etc), when the private companies are straight forward. Unions have an important role to play, if they want to save the company. Just like they are fighting for salary hikes, they should try to woo customers and try for the betterment of the company; After all this for BSNL's survival. If they are not ready yet, then we all know what is going to happen with BSNL.

Image Courtesy : Wikipedia

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