Roshni Sarkar (name changed) has been working in BSNL for the last 25 years. The developments around closure doesn’t impact her at all, as she has been well prepared for it since last many years. She understands the difficulties BSNL is facing to sustain itself in a competitive market and is willing to accept what the government decides. On the other hand, Prakash Singh (name changed) is part of MTNL since the last 30 years and close to retiring, but still is opposed to a voluntary retirement scheme (VRS) as proposed by the PSU. Many others are worried about losing their jobs being single earning members of their families.
It’s a Catch-22 situation for the government, who must decide between survival of BSNL/MTNL on one side and safeguarding the interests of employees. BSNL has a huge employee base of 1.66 lakh, out of which the company wants to retire at least 74,000. MTNL, which operates only in Delhi and Mumbai, has a headcount of 21,679, out of which it wants to retire 12,500.
No doubt, the PSUs are overstaffed compared to private players who have just 25,000-30,000 employees across India. About 60% of BSNL’s revenues go towards managing employee expenses, while for MTNL it is around 87%.
Besides the competition, which was triggered after entry of Reliance Jio in September 2016, the survival of the PSUs was largely dependent on the attitude of its employees, who could not approach a professional attitude with the change in times.
The Department of Telecommunications is equally to be blamed because of excessive interference in all key decisions, according to experts who spoke anonymously.
The government cannot escape the blame in the mismanagement and functioning of telecom PSUs. If you are a cause of the problem, then you should also be part of the solution too, said Mahesh Uppal, a telecom expert.
The PSUs have been in losses even before the entry of new player Reliance Jio. But, post it, the financial health worsened. In 2016-17, BSNL’s revenues stood at Rs 31,533 crore, which came down to Rs 18,865 crore (unaudited) in 2018-19, while net loss increased from Rs 4,793 crore in 2016-17 to Rs 13,804 crore (unaudited).
For MTNL, the revenues went down from Rs 3,552 crore in 2016-17 to Rs 2,607 crore in 2018-19. While its net loss increased from Rs 2,971 crore in 2016-17 to Rs 3,398 crore in 2018-19. Both the firms have recently delayed payment of salaries to its employees.
The low data tariffs with free voice calls impacted the industry as a whole and not just PSUs.
Reliance Jio, which shook the telecom industry with its disruptive pricing, has a pan-India 4G network. The data consumption on mobile devices has gone up substantially since the advent of 4G with RJio in late 2016. Though the data consumption on mobiles grew substantially, the financials of the incumbents took a hit after the debut of RJio, which also led to consolidation in the telecom sector. Now, only three private players are left – Airtel, Vodafone Idea (after their merger) apart from BSNL/MTNL.
The telecom ministry has proposed a plan comprising an early retirement of staff, capital infusion and monetisation of assets to keep them afloat in a highly competitive market. The total package cost for the government and BSNL will be around Rs 75,000 crore.
An in-principle approval for a potential merger of the two state-run companies is also part of the proposals, according to a senior ministry official. To facilitate a merger, the creation of a special purpose vehicle has been suggested to hive off MTNL’s debt along with equivalent assets. Besides, it also envisages monetisation of the companies’ towers and fibre assets via an infrastructure investment trust, or InvIT, according to the draft proposals for the Cabinet.
The reduction in the retirement age from 60 years to 58 years and a voluntary retirement scheme (VRS) will bring down the employee strength of BSNL by 74,000 and MTNL by 12,500. The VRS proposal will be funded with long-term bonds with a sovereign guarantee and will be paid ex gratia on the Gujarat model. Except for the pensionary benefits, which will be advanced, there will no outgo from the government. Besides, allotment of 4G spectrum is also part of the revival plan.
Even a closure of both the firms was considered as an option, but with the huge financial implication, the plan was shelved. Strategic disinvestment was also given a thought, but it was rejected considering the current financial stress in the industry.
The Cabinet will give final approval to the proposals prepared by the Department of Telecommunications.
With the proposed measures (if accepted as it is), it is expected that BSNL will come out of losses by 2023-24 while MTNL will be back to profits in 2025-26, according to estimates. Both the PSUs have a debt of around Rs 20,000 crore.
Will a package revive the fortunes?
Experts are divided whether pumping in money and allotment of 4G spectrum to the sick PSUs will have a significant impact. For 4G, both the firms will be late entrants. Half of the mobile users have lapped up 4G as videos and music consumption has hit the roof.
Faisal Kawoosa, the founder of consultancy firm TechARC, said even if BSNL had got 4G spectrum, things would not have been different. Who has made money out of 4G yet in India for that matter, at least the operator side?
“Just imagine even if they had 4G, could they have survived the vigour/aggression with which Jio entered. It gave shivers to incumbents like Airtel, Vodafone and Idea; how could have BSNL/ MTNL survived? I feel they would have been much worse if they had been with 4G,” he said.
Mahesh Uppal, a telecom expert, said the larger question of whether there should be a bailout of ailing telecom PSUs is complex. “If the government has not learned, not to control in their commercial decisions, if they are going to keep interfering in their business, then the answer is very clear, the government should not put up any money. There are really no grounds for putting more money.”
But if the government is agreeable to an upgrade of its management, and to bring in a commercially driven partner who can leverage the massive resources of the PSUs and generate revenues, then the revival package would be worth it.
Both the firms, especially BSNL, have huge assets, be in terms of real estate or optical fibre, which will be very essential for the smooth rollout of next-generation technology 5G.
BSNL has huge infra assets and Right of Ways are an advantage, which can be shared with private players. Their real estate is very valuable with presence in all major city centres with premium real estate.
Land monetisation is a part of the revival plans, but it will a long-term process and may not generate any immediate returns.
The way forward
There is a real reason to have competition between the public sector and private sector, landline versus mobile and languages, satellite, all kinds of things. There is an equally good reason for BSNL to share its infrastructure with private operators on a commercial basis. Many things they can do, which unfortunately because of interference and because of lack of commercial savvy doesn’t happen, experts said.
“They (telecom PSUs) can be operators of operators, they can provide infrastructure their competitors need, this could be one solution. They can also provide services, provided they have 4G spectrum, and bringing on board a commercially driven partner. The government needs to make sure that there will be no interference in commercial decisions. Not having 4G spectrum is no doubt a big hurdle for them,” Uppal said.
Experts acknowledge the work BSNL does in far-flung areas, where private players are unwilling to go. This is the reason why the government should assist them but simply pouring money without taking additional strategic steps could be a mistake.
“BSNL/MTNL still have relevance in the backdrop of new digital communications policy. BSNL can play the primary role in Connect and MTNL in Propel. For instance, BSNL can work on Agriculture Internet of Things as a service, where many of services can run on narrowband IoT using 2G, and in MTNL areas they could focus on FTTx services. There has to be a business plan which fits into the market requirements these operate in, and not just moving up the tech ladder for me-too purposes,” Kawoosa said.
The only way out seems to be bringing a new commercially driven partner who can quickly upgrade its infrastructure and services to levels that the market expects from a national telecom player.
The real issue is what do you want to do with the company and whether you’re willing to swallow a bitter pill, Uppal said.―DNA India