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BSNL: How one of the most profitable PSUs lost to private players, reached to the verge of closure

Krishnanand Tripathi
BSNL News, MTNL News, Package, Salary

BSNL-MTNL: India’s largest public-sector telecom operator Bharat Sanchar Nigam Limited (BSNL) seems to be heading towards uncertain times. The public sector telecom giant that made telecom services accessible to rural areas by providing affordable mobile connections in commercially non-viable remote areas has been incurring losses for the last several years, prompting the government to consider its sell-off or even complete closure. BSNL has incurred a cumulative loss of Rs 17,645 crore between 2015-16 to 2017-18 and its loss in FY 2018-19 is pegged at over Rs 14,000 crore. The total loss of BSNL in the last four years has been pegged at close to Rs 32,000 crore. It lead to the reports that the Union government is considering complete closure of the two stressed telecom PSUs – BSNL and MTNL.

"It is very easy for the government to say that it will close the company. The company has given huge returns to the government. The kind of investments that were made in the company, it has paid many times over," said SD Saxena, former director of finance of BSNL.

"The company was formed in 2000 and by 2008 it has paid many times more to the government than what was invested in the company," he told Financial Express Online, adding that it is the only company in telecom sector that offers telecom services at pan-India level and closing down this kind of company may not be advisable.

His views find echoes in the another telecom expert Ravi Visvesvaraya Sharada Prasad who has closely tracked the sector for several decades.

"In my view, the country should have a national public sector telecom operator. It is required for strategic reasons and it is also needed because private players will not cover some regions due to commercial reasons," he told Financial Express Online.

Once a crown jewel among the central PSUs, the BSNL has seen the extreme ends in its nearly two decades long journey, after its conversion into a corporate entity from a government department in October 2000. After making profit for the first 8 years of its operations, BSNL reported its first loss in FY 2009-10 due to intense competition from aggressive private players like Airtel, Vodafone and Idea.

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Telecom experts and former officials of BSNL blame the red tape and slow pace of decision making for the sorry state of affairs of BSNL that was once spearheading the Union government’s off-budget capital expenditure programme and earned more profit than India’s largest oil marketing company Indian Oil.

"Once BSNL’s capital expenditure was more than that of Indian Railways and our profit was more than that of Indian Oil. This is a PSU that performed well for the first 8-9 years of its operation," SD Saxena told Financial Express Online.

Sinha blamed private telecom players and rigid tendering rules of the government for loss of BSNL’s market share to private companies. BSNL was very strong in fixed-line services and it still commands the largest market share in the landline telephone market but it could not cope up with the challenge posed by more agile private players in the mobile sector.

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"The company was doing very well in the mobile sector also but it could not come up quickly in the mobile sector because of specific tendering requirements," said SD Saxena.

"In those days the demand in the mobile sector was such that the sector was adding more than one crore customers a month and we wanted to go quickly into the sector. But every time we were asked to go through normal tendering route which was not applicable on the industry because technology was changing very fast," Sinha said while giving the reasons for less than expected growth of BSNL’s cellular business which was launched under the brand name of CellOne.

"Every time a tender was floated, the tender was rejected by the government. If this was the position that you don’t let the company play and when the company fails then you don’t support the company and then the easiest way is to just kill the company," said SD Sinha.

Uncertainty the fate of more than 1.65 lakh employees hangs in balance as the Union government mulls several options about the future of BSNL and MTNL, including a complete closure. According to reports, finance ministry has rejected over Rs 70,000 crore revival proposal put forward by the department of telecom and has instead suggested the closure of both BSNL and MTNL.

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A proposal vehemently opposed by central trade unions and employee unions who blame the government for not supporting the company in the times of crisis.