India File

Wired to fail

| Updated on July 29, 2019 Published on July 29, 2019

In 2004, when private mobile operators began to threaten BSNL’s dominance with steep tariff cuts, the public sector company decided to retaliate by announcing price discounts for its subscribers. The aggressive action by BSNL, unlike a PSU company, helped it consolidate its position in cellular mobile telephony. But a few months later an audit report questioned the management on the tariff cuts.

“I was asked why we cut tariffs as it resulted in a loss of ₹1,100 crore. I told them had we not reduced tariffs, BSNL would have lost ₹8,000 crore because mobile users would have moved to cheaper private operators’ network. We had to fight to get flexibility in fixing tariffs in a hyper-competitive market,” recalls SD Saxena, Director (Finance), BSNL, 2000-2008.

Cut to 2008 when the Indian cellular market was at the cusp of exponential growth with 6-10 million new mobile users being added every month. Bharti Airtel was the top operator with 57 million users, followed by Vodafone-Essar at 41 million. BSNL with 33.7 million users decided to up the ante and announced an audacious plan to increase its network capacity by 94 million new lines at an investment of $10 billion, making it the world’s largest telecom equipment contract at that time. But then allegations of irregularities in the tendering process hit the entire project. Two years later, in 2010, the entire project was scrapped, dealing a crippling blow to BSNL’s expansion plans. Without adequate capacity to meet the growing demand for mobile phones, BSNL was pushed to the fifth spot after Airtel, Reliance Communications, Vodafone Essar and Idea Cellular. BSNL’s revenues were nearly ₹40,000 crore in March 2007 while Bharti’s revenues were only ₹18,420 crore. By 2009, BSNL’s profits had nosedived 81 per cent and revenues fell 6 per cent even as Bharti Airtel’s revenues grew by over ₹10,000 crore during 2008-09 and profits to ₹7,859 crore.

“The destruction of BSNL started when it was prevented from going ahead with the 94-million-line contract. Who were the people behind that decision? There were some in the industry who may have influenced the decision because if BSNL had gone ahead with the project then their valuations would have dropped,” says BK Syngal, former Chairman and Managing Director of Videsh Sanchar Nigam Ltd (Now Tata Communications).

There were other decisions that deepened the rot. In the 2010 spectrum auction, while private players who won broadband spectrum were given airwaves in the 2.3 Ghz band, BSNL was offered bandwidth in the 2.5 GHz band, untested globally for 4G services. BSNL decided to deploy a new technology called WiMax that had just been launched in a few areas in the US and Russia.

By 2012, BSNL gave up on the service and offered to surrender the spectrum back to the Government. Since then, BSNL has not been given access to 4G spectrum at a time when private players are making most of their revenue offering data services. “There was probably some degree of political interference and government bureaucracy, where decisions were slow,” says TV Ramachandran, President of Broadband India Forum. Ramachandran would know because he was spearheading the Cellular Operators Association of India, representing large private telecom players.

DPS Seth, the first Chairman and Managing Director of BSNL when it was corporatised in 2000, had to leave after differences with the political bosses. “After the creation of BSNL initially it was fine and we were taking quick decisions. But then the powers that be started interfering. There were disagreements and I had to exit the company because of that”.

The company, which recorded a profit of ₹10,000 crore in 2004-05, now has losses estimated to be about ₹14,000 crore in 2018-19. Experts also blame the large workforce. As of March 31, 2019, the firm employed about 1.63 lakh personnel. In comparison, the country’s largest mobile operator by subscribers Vodafone Idea employs a little over 9,000 and Bharti Airtel has 16,000 in India. BSNL has to spend 75 per cent of its revenues on salaries to employees. “BSNL’s unsustainable headcount, wage expenses and delay in procurement and installation of network equipment were the main reasons that led to this situation,” says Rajan S Mathews, Director General, Cellular Operators Association of India.

Ownership issue

According to Saxena, BSNL’s woes have multiplied because there has been no one to take ownership. “There have been officers of the Indian Telecom Service cadre who wanted to enjoy all the benefits of being in BSNL but there was no commitment to the company. But those who got absorbed in BSNL are suffering,” he says.

Satish, from Kottayam who has been with the company for 17 years, says employees like him see senior officers apply for jobs elsewhere. “They have no incentive to stay committed to BSNL. They say they came on deputation, they tried and it didn’t work. In a company, accountability should apply from the top to the bottom. Here, they behave like a company sometimes, at other times like government, depending on circumstances.”

Note: Names of employees have been changed

With inputs from Nandana James

Published on July 29, 2019
This article is closed for comments.
Please Email the Editor