From bureaucratic whim to business sense

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New Delhi, Oct 1: In this concluding part of our report on the public sector telecom operator, we look at possible options for its survival in an increasingly competitive and challenging sector.

State-owned Bharat Sanchar Nigam Ltd (BSNL) may not be in the intensive care unit yet, but it will certainly end up there unless structural changes are made to its functioning soon, feel analysts. But what are the options before the moribund telecom major, which still has the potential to give private sector operators a run for their money?

BSNL’s systemic constraints are distressingly similar to that of almost every Indian public sector unit, be it in power, oil, aviation or steel. But if it is to remain a serious player in the country’s increasingly competitive telecom segment, the company must achieve greater operational autonomy and transparency. And a first step towards that must surely be by listing on the stock exchanges.

Analysts have been harping that an IPO for BSNL is imperative—a fact that is acknowledged by company officials, who have been flirting with the idea for over two years, but initially faced lukewarm response from the government and later stiff resistance from unions. In the process, valuable time has been lost, resulting in BSNL abdicating its number one position in the segment and, hence, seeing one-third of its expected valuation eroded.

If remedial action is not taken now, it won’t be long before BSNL follows in the footsteps of older cousin National Aviation Co Ltd, formed by the merger of state-owned carriers Air-India and Indian Airlines. The completion of the airlines’ merger looks difficult and, according to latest estimates, will take at least another two years. Meanwhile, both the airlines bleed continuously (this fiscal, losses are expected to touch Rs 2,000 crore) and have lost many of their best pilots to the private sector.

Similarly, given the shrinking profitability of BSNL, any delay in an IPO beyond March 2009 could spell disaster. AK Sinha, former CMD of the company, agrees. “The IPO should come within the next six months or it will be too late. Ideally, the IPO should have been during BSNL’s peak performance two years ago when net profits were at Rs 9,000 crore,” he says.