Even as the telecom industry in the country is scripting success stories with private players posting double-digit growth, Bharat Sanchar Nigam Ltd (BSNL), country?s second largest firm by subscriber base, is fast racing downhill into trouble.
Company officials have estimated that during the current fiscal, the company will post losses of around Rs 4,500-5,000 crore on the back of higher wage bill and operating expenses.
In its worst performance since its inception in October 2000, the state-owned company has posted a 95% decline in its net profit during 2008-09 at Rs 104 crore. This is on the back of total revenue of Rs 35,000 crore, a meagre rise over Rs 32,000 crore registered a year ago.
Company officials told FE that with the pay revision of the executives, the salary bill would go up by Rs 2,000-2,500 crore in the current fiscal while operating expenditure would increase by Rs 1,500-1,600 crore.
Given the slide in BSNL?s performance, analysts maintain that the company?s valuation would take a beating. The government plans to divest 10% in the company for which talks with the unions are on.
FE had reported in October 2008 that BSNL, which till three years ago had posted a profit of Rs 10,000 crore on revenue of around Rs 40,000 crore, would in no time become the worst performer in the thriving telecom industry.
The biggest culprit in BSNL?s miserable performance has been the outrageous wage bill of Rs 10,000 crore for its over 3 lakh employees. Compared to Bharti Airtel?s 4.6% employee turnover ratio, this represents 28% of BSNL?s turnover.
With revenue not growing and expenditure mounting, the company is the perfect case of becoming a sick unit, analysts said.
Though the company suffered a heavy blow on account of tendering delays in expanding its GSM network, the biggest contributors to the company?s floundering performance, apart from the unjustifiably high wage bill, is the loss due to abolition of access deficit charge and the licence fee reimbursement, which the government stopped two years back.
Moreover, the abolition of the ADC, which was re-imbursement for venturing into unprofitable areas for social goals, took away around Rs 6,000 crore from the company. In lieu of it, BSNL gets a yearly sum of Rs 2,000 crore from the universal service obligation (USO) fund.
It now also has to pay yearly a revenue share licence fee of Rs 2,400 crore to the government, which till 2007 was being reimbursed to it.
To cope up in the highly competitive market, BSNL recently restructured its organisational functioning by creating verticals like private telecom operators. For instance, against the old structure of having directors for functions like commercial and marketing, finance, HR, it has now verticals like fixed services, mobile services, new businesses and infrastructure.
However, the biggest problem the company is facing, at present is the lack of branding and marketing exercise along with the burden of servicing huge areas, which are unremunerative. Though, off late it is adding subscribers, they are mostly the low Arpu ones.