Back in February 2021, I had written an article in this magazine titled “Flogging a Dead Horse” – about Kolkata’s tram company.
Actually, this company has just 2,000 people and Rs15 crore of annual loss. Hence, it is not quite horse-sized—maybe just a little pony.
What about Bharat Sanchar Nigam Ltd (BSNL)—62,200 employees and an annual loss of Rs7,000 crore? An elephant, surely!
A quick look at BSNL:
- Loss of Rs7,000 crore on an annual income of Rs19,000 crore.
- Fixed assets of Rs98,000 crore, i.e., each rupee of fixed assets generates less than 20 paise of income.
- Rs886 crore written off in the year.
- Client base shrinking steadily while the market is expanding.
- A decade behind in technology in a hi-tech business.
There are many more juicy numbers lurking in the nooks and crannies of BSNL’s 516-page annual report for FY20-21, but I think I have said enough to justify the term ‘dead elephant’.
Then, let me take a break to tell you a story—just to show that I love BSNL and shall be ever grateful to it.
Upon return to Kolkata after retirement, I faced an unforeseen problem—address proof. I could not produce any ‘evidence’ that I lived somewhere. You see, I had rented a flat and had a tenancy contract, but that is not adequate ‘address proof’.
Without the address proof, I could not get anything going—phones, gas connection, and car purchase.
My friend gave me a tip. “Try BSNL,” he said. “They have no customers.”
Sure enough, the spacious BSNL office in Jadavpur had half a dozen people sitting behind the counter but nobody in front of it.
I decided to play big and chose the most expensive broadband plan available—Rs5,500pm (per month). That worked! Everyone gathered around to watch this great event happening—someone actually buying the mega plan.
I did the 'needful' by way of form-filling, but the hitch that I was dreading reared its ugly head.
“This won’t do,” said the BSNL karmachari, 'tenancy contract is not a valid proof of address.'
Immediately, five others jumped on him.
“Are you mad?” they fumed. “Sir is buying the mega plan, and you are spoiling it!”
This collective pressure made the conscientious objector relent, and I got my connection.
Next month—the BSNL bill arrived at my rented flat.
Address proof at last! The BSNL bill was a valid document for proving where I lived.
I quickly signed up for all the other things that were on hold, and my job was done. Then, I am somewhat ashamed to admit I cancelled BSNL and signed up with Tata Docomo.
Confession done—now let us move on to the flogging part.
BSNL has a market share of less than 9%. Its mobile subscription base has been dropping since January 2021. In January 2023 alone, BSNL lost over 1.5mn (million) users. This is despite BSNL charging significantly less than other service providers.
The reason is not hard to find. BSNL is woefully behind the times. It is still on 2G/3G, while its competitors have moved on to 4G more than a decade ago. Airtel first introduced 4G in 2012 and when Jio entered the market, 4G became the norm. Alas, BSNL was nowhere.
The story is much the same for broadband. From being the market leader some years ago, BSNL is now a distant third and continues to lose customers while new users are coming in to expand the user base.
Even in the landline segment, BSNL has lost market leadership to Jio.
How does BSNL carry on, then?
Partly because BSNL has a bunch of (reluctant?) customers—government departments and public sector banks (PSBs) who continue to use BSNL.
And flogging, from time to time, by the owner—government of India (GoI).
Back in 2019, GoI gave Rs74,000 crore to BSNL, primarily to reduce its staff headcount through a voluntary retirement scheme (VRS). This did work, and the number has reduced to 62,000 at present from 1,83,000. But the fundamentals have not changed, and the business continues to slide downwards.
Time for another flogging and a bigger dose, too.
Last July, GoI announced a further Rs1.64 lakh crore bailout for BSNL, comprising of cash conversion of debt to equity and free 4G spectrum. Recharged, BSNL moved to launch 4G.
But wait...an elephant doesn’t rush, does it?
Facing 'continued hyper competition' (words from BSNL’s chairman & managing director-CMD), which is intensifying all the time, BSNL took only 10 months to award the 4G contract to Tata Consultancy Services (TCS). Heaven knows when BSNL will actually launch 4G. In the meantime, Airtel and Jio will be well set in 5G.
Why is GoI repeatedly pouring money into BSNL? Three stated reasons:
- Telecom is a vital sector in which GoI must have a presence through a State-run telco, apparently for security and prevention of cybercrime.
- Private telcos focus only on profits and do not service remote areas or poorer people.
- India should not have a duopoly in telecom (Jio and Airtel), and there should be a third player in the market.
Lofty goals, indeed.
But, in my view, BSNL is not positioned to deliver, regardless of how much money (your money and mine, my dear sirs) is poured into it. Too many basic things are wrong with it—company culture, employee morale, lack of skills, elephantine ways of operation. It will need a complete overhaul of many segments, which cannot be done by merely pumping in money.
Moreover, a CMD brought up in the ‘babu’ mode cannot compete with the likes of Mukesh Ambani and Gopal Vittal.
The bailout money of Rs1.64 lakh crore would cover all external liabilities (Rs82,000 crore) plus 10 years’ salary to all staff (Rs58,000 crore) and still have Rs24,000 crore to spare. There would also be freehold land worth Rs63,000 crore (book value), as well as other fixed assets (mobile towers and fibre optic cables) worth Rs20,000 crore.
Need I say more?
What about the lofty goals of a state-run telco, competition and all that?
Sorry, I don’t know the answer, but what seems quite apparent is that BSNL will not achieve these goals, no matter how much taxpayers’ money is poured into it. BSNL’s goals will have to be met in some other way.
Remember, GoI did leave another important sector—air travel—by finally selling Air India. BSNL should be next.
Maybe a private party can revive BSNL the way the Tata group is planning to revive Air India.
Better for everyone.
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(Deserting engineering after a year in a factory, Amitabha Banerjee did an MBA in the US and returned to India. Choosing work-to-live over live-to-work, he joined banking and worked for various banks in India and the Middle East. Post-retirement, he returned to his hometown Kolkata and is now spending his golden years travelling the world, playing bridge, befriending Netflix & Prime Video and writing in his wife’s travel blog.)