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BSNL Crisis: The Profit and Loss Analysis


Post Dussehra has brought two shocking news for tele-users across the country. One, Jio is going to punish you for extra marital affairs (you cannot just get tied with Vodafone, Airtel and other telecom service providers) and the other is that BSNL is almost going to succumb to death. Which one makes your heart pounce more?

My friend was yelling at Jio’s decision to charge for Jio to other calls. Ah, he earns well! He ain’t no poor to not afford to pay some bucks per call. But what about BSNL crisis? Isn’t it as shocking as the first one, if not more? BSNL, once or may be even today, the largest telecom service provider of India is on the verge of being sold or shut down. But, why on earth should it happen? In the game of profit and loss, this public sector undertaking by the Government of India has been facing sheer losses for over a decade and the situation has not meliorated yet. What are the prime and primary causes behind such mess?

The scenario can be seen in different platforms, mostly financial.

Profit and Loss of BSNL:

mrkt

How big is BSNL’s Market?

For last few months there has been a buzz: “BSNL may shut down this year”. Before moving into the profit and loss game, please note that Bharat Sanchar Nigam Limited has a quite significant share in the market. Interestingly and with a blink of positivity, the market share has increased over the years. In 2005 BSNL had 8.65% of market share that increased to 9.05% in the next year. Later in 2017, the share went a baby step higher to 9.35%; however, gaining a mammoth 10.22% in 2018.

Amongst all telecom operators, BSNL stands tall with 49.67% market share (highest by any fixed line operators in India). When it comes to fixed line, BSNL has scores almost solo goals. Don’t you believe? Let’s find out-

marketshare

Increasing share percentage in the market does not fortify the fact that the company has only seen profit. Unfortunately, it has only been the opposite, counting stars on the South Pole.

Look at the chart that shows how market share has increased with true potent of this firm.

market1

The Inception

Bharat Sanchar Nigam Limited, a big name was incorporated in September, 2000; and since its inception the firm promised the audiences of great telecom services. Initially it did so, which is why the firm has managed to get 115.95 million members as on July, 2019.

Uncle Ben had said, “With great power, comes great responsibility”, and Bharat Sanchar Nigam Limited capitalized this suggestion as it spread its mobile networks to remote villages where modern day leading telecom service providers with higher profit margin have failed to reach. It became BSNL’s USP. Everything was going well (if not great) until the financial year 2009-10. The firm’s growth rate in terms of revenue from sale of services has seen significant downfall.

The following table shows how exactly post 2008-09 revenue has affected BSNL’s growth rate:

Financial Year

Growth Rate

2008-09

12.94%

2009-10

10.54%

2010-11

-2.23%

2011-12

-1.03

2012-13

-0.08%

2013-14

5.87%

2014-15

0.64%

2015-16

1.12%

2016-17

1.43%

2017-18

0.89%

growthrate

The Financial Flops

For almost a decade there has been a thorough consistency of financial losses. Such consistency is not at all sought after when you have more than 1, 75,000 employees to take care of.

In the financial year 2016-17 the company posted a serious loss of Rs 4,793 crore. After announcing the financial results in 2017-18, the company has only been posting losses. When someone looks at the figure of loss the company has undergone, it makes them raise their eye brow. Stick a tape on your eyebrow, sit back and witness BSNL crisis:

Financial Year

Figure of Loss (In INR)

2015-16

4,859 Cr.

2016-17

4,793 Cr.

2017-18

7,993 Cr.

2018-19

14,202 Cr.

market3

Considering profit and loss of BSNL over the years, one can assert that yes, the last year is noted as the disaster for such a legendary firm. When someone is trying to defend the losses by portraying hope for the firm, the facts and figures are highly intriguing pertaining to the defense statement came from the telecommunication department.  

Some Reasons to Look at!

There are two faced reasons that one can go through- one, that the firm asserts and the other analyzed and depicted by the pundits.

Firm’s Point of View

Resistance to Change:

According to BSNL, the firm has been struggling with the ageing employees who are facing challenges to cope up with changing and trending technologies. This is why the PMO has suggested to reduce the age of superannuation with proper provision of facilities by the financial year 2019-2020. As per the statement from a BSNL personnel, reducing the age of superannuation may help the firm save approximately Rs. 3000 crore in the bill. BSNL needs to obliterate the ‘incipient sick’ PSU label from it.

What do the Pundits Have to Say?  

1. No Updated Service:

Who on earth provides on 3G in 2019? BSNL, despite being one of largest service providers in the country has not been allocated with a 4G spectrum till today. The Government earns revenue from telecom sector mainly in form of SUC (Spectrum Usage Charges) and license fees. Since, private telecom firms earn more through 4G spectrum, they afford to contribute to higher revenue generation. On the contrary, BSNL struggles to contribute with only 3G and 2G in hand. When most of the telecom service providers are aiming at 5G, the Government is planning to back BSNL with new 4G spectrum standing on the edge of 2019.

2. Lack of Professionalism:

Both BBNL and BSNL have been asked to showcase delay in BharatNet project’s second slot, which has already surpassed the assigned deadline. Less than half of network distribution has been done. Such delay has been prevalent over the years and lack of coordination is rampant.

3. Part of Most PSU Losses:

 If you think that BSNL is replicating Green Day’s “But it’s only me, I walk alone”, you need a solid sense of solidarity; and this time, the camaraderie slogan is sung by many other PSUs. Following table depicts top 9 Public Sector Enterprises (we are giving rest to BSNL off this list) in India that have faced massive loss thus heading towards hermitage.

CPSEs

Net Loss in Crore (INR)

% of Share

Air India Ltd.

-5338

17.07

MTNL

-2973

9.51

Hindustan Photo Films Manufacturing Co. Ltd.

-2917

9.33

Western Coalfields Ltd.

-1757

5.62

Bharat Coking Coal Ltd.

-1391

4.45

Rashtriya Ispat Nigam Ltd.

-1369

4.38

India Infrastructure Finance Co. Ltd.

-1155

3.69

Eastern Coalfields Ltd.

-931

2.98

STCL Ltd.

-657

2.10

Total (1 to 9)

18,488

59.13

netloss

Source: Public Sector Enterprises Survey of 2017-2018

 In the financial year 2017-18, more than 70 public sector enterprises incurred loss amounting total of Rs. 31, 261 crore. Halt! Do not drop your jaw. Many more to come. The top three loss making companies BSNL, Air India and MTNL comprise more than 50% of the total loss i.e. more than Rs. 15,000 crore. Market analysts have brought forth one major factor behind such huge loss i.e. excess of salary than what the enterprises earn as revenue.

When Employee Cost Surpasses Your Revenue

In financial year 2019, India Post’s payment and allowance cost reportedly crossed Rs. 16,000 crore, whereas, the revenue was approximately Rs. 18,000 crore. After factoring pension payouts of approximately Rs. 9,780 crore, the employee cost becomes more than Rs. 25,000 crores. This was the approx. figure in the last fiscal, therefore, amounting almost 50% more than the revenue received.

Result: BSNL failed to clear salary of its employees and is thinking of employee reduction in the name of cost reduction.

Proposed Remedy and Its Practicality  

capsule

BSNL’s financial condition is not treat to experience. However, the Government has pulled up its socks and jumped onto the battle ground to rescue the State Owned firm. Hence, some serious talks were being taken into consideration for further action. With the intervention of PMO, the Telecom Department has finally planned to throw chains to the sinking BSNL.

  1. The firm has asserted that the average age of working employees is 50 that is great opportunity for the company to ensure a fortified saving. That age group comprise almost 55000 employees. Their job will be at stake. Though the department ensured proper implementation of VRS plans to provide adequate post-job security to its employees, collateral damages have always been romanticized as a small part of great works.
  2. According to the telecommunication department, BSNL has the lowest debt amongst all telecom operators. Through the equity infusion of Rs. 7000 crore, the BSNL has sought after 4G radio wave spectrum across the country. The total spectrum is estimated to cost almost Rs. 14,000 crore. Now considering the amount of liability it holds, the biggest challenge is going to be to shade off all the debts and carry out equity infusion.
  3. This fiscal year, the Government has finally decided to increase allocation for telecom public sector undertakings that had earlier dwindled by 15%. The total investment in six telecom public sector undertakings for the financial year 2018-19 was Rs. 16,468.39 crore that was revised to Rs 14,025.90 crore in the current fiscal year (2019-20). Despite reduction in the total allocation, BSNL needs a boost up from the Government. In the FY 2017-18, Rs. 12,186.9 crore was allocated to the telecom PSUs. Now this positive boost specifically planned for BSNL sets to meliorate the current situation of the firm. However, on the practical ground, Government’s comradeship with Jio has literally disowned its own

Important wing. Promoting a three years old company thus revolutionizing the entire telecom market is praiseworthy; however, not in lieu of a PSU’s (being the largest service provider) collapse.

In recent years, the Government of India has faced some tough music for stumbling of Public Sector Enterprises. At present, when the economic crisis with thorough downfall of consumer demand is peeping out to the market, BSNL’s expected crumbling or total black-out is going to add fuel to the flame. In last two days a positive news is roaming around the market regarding a strong remedial action plan. If the plans are truly applied and brought into effect with expertise a legendary firm would never peter with the mist of tragic loss and most importantly more than 100000 employees will not lose their bread.

By Subhankar