Markets: Eerie calm

Markets: Eerie calm

it is not clear when market sentiment can change; as in the past, it can be quite sudden.
At a turn and yet not

At a turn and yet not

RBI could be tempted to cut policy rate to support growth at its bi-monthly review.

Ringing in change is more than a call away at MTNL, BSNL

May 15 2014, 00:52 IST
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Both companies MTNL, BSNL have been saddled with losses for over three years running. PTI Both companies MTNL, BSNL have been saddled with losses for over three years running. PTI
SummaryBoth companies MTNL, BSNL have been saddled with losses for over three years running.

The BJP’s prime ministerial candidate Narendra Modi has said that instead of privatising non-performing PSUs, his priority would be to professionalise them. To buttress his case Modi cites the example of Gujarat where as the chief minister he has been successful in doing so.

However, there are some central PSUs that at a stage where professionalising them may not have much effect. The case of state-owned telecom service providers MTNL and BSNL is an apt example. Though they still have not got a proper bailout package — despite a case for it having been made out — sporadic efforts at professionalising them by hiring consultants have been going on for the last few years with little to show for it. Meanwhile, the telecom market led by private operators has moved too far ahead for the two PSUs to catch up even if a so-called professional management is put in place.

Both companies have been saddled with losses for over three years running. The listed MTNL posted losses of R5,321.12 crore in FY13 while BSNL’s loss stood at R8,198 crore. Both have a bloated workforce, which is a legacy issue for them. The employee cost for MTNL as a percentage of revenue is 103% while for BSNL it stands at 49%. This is when the industry average is around 5%. Compared to, say, Bharti Airtel, which has a total employee base of 18,975 with a subscriber base of around 200 million, BSNL has over 2.5 lakh employees and 94 million users, and MTNL 39,245 for managing 3.37 million customers.

The less said about the subscriber profile of the two companies the better. Around 40% of BSNL’s subscribers are inactive and in the case of MTNL, the figure stands at around 36%. For private sector mobile operators like Bharti, Vodafone and Idea Cellular, the share of active subscribers is over 90%.

The two PSUs rank poorly even on the average revenue per user front. The Arpu for private companies like Bharti is upwards of Rs 150 whereas for BSNL and MTNL it is around Rs 90-100.

The first bailout for the two was provided by the government recently when it agreed to refund around Rs 11,000 crore — Rs 6,724 crore to BSNL and Rs 4,600 crore to MTNL — in lieu of their surrendering their broadband wireless spectrum. In fact, financial assistance has always been given to BSNL either in terms of

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