With BSNL?s mega tender for laying 93 million GSM lines?the world?s largest tender in mobile space?coming under the scanner of the Central Vigilance Commission for alleged irregularities, the question to be asked is not whether such bureaucratic red-tapism is strangling the company?s growth. Instead, as reported by this newspaper, the question to be asked is whether the company, not in the pink of financial health, needs to spend Rs 36,000 crore for laying such huge line capacity. Is there any business case for this?
Four years ago, BSNL was the most profitable telecom company in the country with a net profit of around Rs 10,000 crore. However, over the years, profitability has taken such a hit that the company is poised to post losses to the tune of Rs 500 crore in the current fiscal and Rs 2,500 crore by the next. One of the reasons the company lost the top slot in mobile phone users was the delay in its expansion plans, typical in PSUs, and its high operational costs have long taken a toll on its bottom line?the wage bill continues to be its single largest cost.
It makes sense for the company to first put its house in order as the government?s largesse of the past has dried up. It needs to first seriously re-examine its market position and strength, and then expand. In the current case, the business premise is itself outdated. The expansion plan was conceived on the premise that its market share would stabilise at around 15%. In reality it has dropped to less than 13%. Secondly, with tariff wars ensuing between telecom operators, BSNL is going to bleed the most since it can?t reduce its operational costs. At best, BSNL?s market share is expected to stabilise at around 8% once the new operators launch their operations.
Simple arithmetic tells us that the company doesn?t need to add huge line capacity. Secondly, once the 3G spectrum auctions take place, it will need to upgrade its existing infrastructure and even match the bid amounts that private operators make. Isn?t it imperative for the company to pause and ponder where all that money will come from?
anandita.mankotia@expressindia.com