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State-owned telecom operator Bharat Sanchar Nigam Ltd (BSNL) has missed paying February salaries, according to a report.
The report, which quoted the Sanchar Nigam Executives Association (SNEA) website, said this is not the first time a public sector unit (PSU) has delayed salary payment or run into financial troubles. This also doesn’t necessarily mean the government sits up and takes note of the massive stress in the sector, said the report on telecommunication services by Kotak Institutional Equities.
“In what we believe is an important development, once-a-Navratna-PSU, BSNL missed paying its employees their February salaries on time. We understand from various publicly available sources and unauthenticated media reports that these payouts have not been made yet,” it added.
Navratna to ‘sick PSU’
“To be sure, BSNL’s financial position has been deteriorating for a long time — the company has, in the past 14 years, moved from Navratna status to being declared as an ‘incipient sick’ PSU,” the report added.
It was in FY08 that BSNL last saw positive operating profit (EBIT). Since then (from FY09 to FY18) the company has posted a cumulative EBIT loss of ₹82,000 crore. This figure would have crossed ₹90,000 crore as of December 2018.
Employee expenses, including retiral benefit accruals, stood at 66 per cent of operating revenues in FY18 versus 21 per cent in FY06 and 27 per cent in FY08. The PSU’s operating revenues stood at ₹22,700 crore in FY18, 37 per cent below the peak FY06 levels, reflecting industry-wide challenges as well as loss of market share.
BSNL moved from a peak net cash position of ₹37,200 crore in FY08 to a net debt position of ₹8,600 crore in FY18.
“We believe the current annual cash loss run-rate for BSNL would be in excess of $1 billion. These challenges have also meant that BSNL remains far behind the three private operators (Bharti Airtel, Vodafone Idea and Reliance Jio Infocomm) on network coverage, capacity and quality,” the Kotak report added.
“The government (as the owner of BSNL) will need to either (a) answer consistent, large, equity calls to keep BSNL afloat, as preferential low or no-cost spectrum allocation alone will not solve the problem, or (b) shut BSNL down. This too will involve material one-time costs,” it further said.
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