Editorial

A quick-fix won’t do

| Updated on May 13, 2013

Operations of the two PSU telecom majors have turned so unviable that only drastic measures will help.

The Government should waste no time in going ahead with a proposed plan to hive off the network infrastructure and land assets of BSNL and MTNL into separate companies. The idea makes eminent sense, given the perilous finances of the two telecom public sector undertakings (PSU) and also the fact that they still have enough worth saving unlike a Scooters India or National Textile Corporation. Both BSNL and MTNL have been bleeding heavily over the last four years: The former’s losses have touched Rs 8,200 crore in 2012-13, while the latter’s net worth will soon be fully eroded. The main problem, predictably, is their huge manpower costs – claiming over 100 per cent of MTNL’s revenues and almost 50 per cent of BSNL’s, against an industry average of below 5 per cent.

At the same time, the two companies have valuable telecom infrastructure that can be put to good use. BSNL, on its own, today has an optical fibre cable network covering over 700,000 km, which no private operator has or intends laying in the near future. Given its indispensability to providing high-speed broadband or data-intensive applications such as video telephony and telemedicine – which cannot be effectively delivered over mobile networks running on bandwidth-constrained spectrum – there is no reason for BSNL’s fibre infrastructure not being made into a sharable resource for others to use as well. The best way to do it is to transfer BSNL/MTNL’s entire tower and fibre network to a separate company, which, if needed, can even have a strategic investor. The whole idea here is to not only ensure optimal utilisation, but also insulate further infrastructure expansions from the vagaries of the two state-owned firms’ services operations.

A separate company could, likewise, be created to monetise the huge land assets available with BSNL and MTNL. The proceeds from these should go primarily to finance a voluntary retirement scheme and also meeting future pension liabilities. That leaves servicing end-consumers. While the two PSUs together still have a nearly 15 per cent telecom subscribers’ share, the fact remains that this is the weakest part of their business. Although there is no business case for keeping BSNL and MTNL as two independent entities, a merger in itself will not bring about significant operational synergies to counteract the adverse effects of a bloated workforce. What they need to do really is explore the public-private partnership route to manage the customer end of their business. There is, after all, a franchise value to the customer base that the two PSUs have acquired over the years, which can be leveraged to good effect. It is true that a combination of political interference and administrative bungling over the years, and not employees per se, is what that has led to the abysmal state of affairs. But then, there is no going back now and it is time to look ahead.

Published on May 13, 2013

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