When the Titanic was being built, no one in the US would have thought in their wildest dreams that the ship would sink in its maiden voyage; nor would have the Palestinians thought that the mighty Goliath could be defeated by a small shepherd boy. India could soon have its own Titanic-like story in the form of Bharat Sanchar Nigam Ltd. The telecom behemoth, which once upon a time was the largest telecom player in the country, is today in a sorry state.
Consider these: In 2005-06, the Public Sector Undertaking reported revenues of Rs 36,138 crore from operations, which has reduced to Rs 30,268 crore in 2008-09. Profit from operations has slumped — from Rs 4,230 crore in 2005 to a net profit of Rs 574 crore in 2009. All indications are there that the company will slide into the red at the end of the current fiscal. It is also losing market share in the highly competitive market, which has as many as 12 operators.
The company has lost 6 million fixed-line telephony subscribers in the last three years. In June 2006, it was within shouting distance of the top spot in the mobile telephony business in terms of subscribers. But then the slide began and today BSNL is down at the number four slot in the GSM category. All this happened when the telecom sector was growing the fastest in the world. While BSNL's market share decreased, private operators such as Airtel and Vodafone tripled their subscriber base. In 2008, BSNL lost the top spot in terms of revenue to Bharti Airtel.
So, like Titanic, did BSNL also hit a large iceberg that has sunk the company so close to being bankrupt? Dr D.P.S. Seth, the first Chairman of BSNL, says that political interference and subsequent delays in procuring network equipment at the right time is the most important reason for the way the telecom PSU's performance has nosedived. “For a telecom operator to be successful it has to roll out a network that can support the subscribers. This has to be done at the right time. How can BSNL compete with the private players when it is not allowed to buy the equipment for three-four years?”
Since 2005, the public sector unit has been able to buy mobile telephony gear for supporting just about 20 million subscribers due to controversies surrounding the tendering process. Private players, on the other hand, have signed multiple deals during the same period which has enabled them to triple their subscriber base in the last five years. BSNL floated a tender for 63 million lines in 2006 but was delayed after Motorola went to court. This tender was finally reduced to a mere 13 million lines at the behest of the Communications and IT Minister, A Raja.
Though BSNL tried to compensate by floating another tender to buy equipment for supporting 93 million subscribers in 2007, the contract is yet to be signed owing to a messed-up process. This time Nokia Siemens has gone to court after BSNL disqualified its offer, leaving only Ericsson and Chinese manufacturer Huawei in the fray.
The matter has got further complicated with the Home Ministry raising concerns over giving the contract to the Chinese vendor, the Central Vigilance Commission has started an enquiry into the entire process. Had BSNL gone ahead with these two projects, it would have been at the top.
“Every time BSNL wants to buy equipment there are hundreds of questions asked by everyone on issues related to irregularities and allegations of corruption. If the Government has appointed a Chairman and a Board then it should allow them to take decisions freely. Yes, they need to be accountable, but just like private operators are accountable to their stakeholders and respond to queries once a year in the annual general body meeting, a PSU should also be given the flexibility to function independently and then stand scrutiny of the Government agencies once a year. At present the scrutiny on PSUs is on a daily basis. In a year the Chairman of BSNL, in general, spends 260 days responding to such queries, so when will he work?” poses S.D. Saxena, who recently retired as Director (Finance), BSNL. BSNL insiders are sure that its business interests are being sabotaged by private operators even as the PSU has become a playground for dishing out political favours.
The brakes on BSNL's mobile juggernaut were applied in 2006 when a vendor, disqualified from a tender to supply mobile equipment, went to court, alleging irregularities in the process. “It is said that the court case was in the interest of the competitors who wanted the delay to prolong so that BSNL goes out the burgeoning market place giving the other operators a free hand in the market. We found that in those days not a single lawyer worth the name was available to fight the case on behalf of BSNL as all the other operators had retained them to fight the case for the applicant who was delaying the finalisation of the tender,” says Saxena.
Slow decision-making
Another former Chairman of BSNL under whom the PSU was growing rapidly says the blame also lies with the top management for slow decision making. “There are lots of discussions and debates but the final decision is taken after much delay. For example, the move to share towers should have been done three years ago. I don't see the push that is required from the top management. The more you delay decisions, the more will be the interference from every quarter. The management of such a large company should be bold and take quick decisions. They should not accept whatever comes from the top,” says the former BSNL honcho on conditions of anonymity.
The delay in decision making is not allowing BSNL to press home some of its advantages. For example it had been given spectrum to offer third-generation mobile services and wireless broadband services almost two years ahead of private players but has not been able to capitalise on the first-mover advantage due to lack of network equipment. The other issue the PSU is struggling to work with is to bring the employees union on the same page as the management. While BSNL management wants to get the company listed on the stock exchanges to bring in more accountability and efficiency, the union is dead against the move. “BSNL is not being beaten in the market. If that was the case we would have reconciled to it being the product of market forces. But BSNL's downfall is being caused through external factors,' says a BSNL officer.
No dearth of talent
But not all is lost yet. For one, though they are a demoralised lot these days, BSNL officers are a talented lot. “Most of the private operator's networks have been rolled out by retired BSNL officers. So if you give them a free hand to run the operations these officers can perform better than any executive in a private company. Even now, if things change, BSNL can compete,” says Dr Seth. The other good thing is that BSNL has a huge cash reserve of Rs 38,000 crore, which gives it the bandwidth to make large investments.
In a bid to address the problems, the Prime Minister recently held a meeting with top functionaries of the Communications Ministry and BSNL, to discuss a whole host of issues, including the proposed IPO and possible merger with MTNL. “With oversight by the Prime Minister, I am confident the necessary steps will be taken to facilitate a turnaround in BSNL's fortunes, ” says Rajeev Chandrasekhar, Member of Parliament, who had written to the PM suggesting ways to turn around the PSU. Chandrasekhar's suggestions include changing the management structure of BSNL and appointing a Chief Operating Officer through an international hunt.Three lakh employees and 80 million customers across the country would be hoping that BSNL does not sink and lives to fight another day.
