Why BSNL needs to increase its customer base or cut staff

State-run telecom firm BSNL, which missed timely payment of salaries in February, serves only around 650 customers per employee, a sharp contrast from private players where per employee customers are in the range of 17,500 to 27,500. The situation at MTNL is even worse where per employee customers are a meagre 160.

BSNL has the highest number of employees on its rolls among the telecom operators in the country. BSNL has around 1.76 lakh employees for a customer base of 114.34 million at the end of December 2018. In contrast, Vodafone Idea, which is the largest telco, has just around 12,000 on-roll employees for a customer base of 418.74 million. Even if off-roll staff is counted, the employee strength of the company comes to around 15,000.

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The number of customers per employee comes out to around 650 for BSNL whereas for Vodafone Idea, the number stands at about 27,916 customers per employee. Similarly, Bharti Airtel’s one employee serves around 20,000 customers. Airtel has 340.25 million customers at the end of December 2018 and an employee count of 16,962 on-roll staff.

The newest entrant Reliance Jio also has around 15,000-17,000 staff across the country and with a customer base of 280.11 million, per employee customers turns out to be around 17,500.

Almost 60% of BSNL’s revenues go into paying salaries. The situation is even worse for MTNL, which provides services in Delhi and Mumbai. MTNL’s per employee customers stand at a meagre 160. The company has a user base of 3.47 million at the end of December whereas the employee count was around 22,300.

As per a report by Kotak Institutional Equities, BSNL has, in the past 14 years, moved from Navratna status to being declared as an ‘Incipient Sick’ public sector unit. “FY08 was the last year of positive operating profit (EBIT) for BSNL. Since then, the company has posted a cumulative, FY2009-18, EBIT loss of `820 bn. This figure would have crossed `900 bn by end-Dec 2018, in our view,” the report said.

The report further said employee expenses, including retiral benefit accruals, stood at 66% of operating revenues in FY18 versus 21% in FY 2006 and 27% in FY08. “FY 2018 operating revenues, at `227 bn, stood 37% below the peak FY06 levels reflecting industry-wide challenges as well as loss of market share for BSNL,” it added. On the balance sheet front, BSNL moved from a peak net cash position of `37,200 crore at end-FY08 to a net debt position of `8,600 crore at end-FY18, Kotak added.

The telecom sector has witnessed massive job losses in the last couple of years, primarily because of heightened competition after the entry of Reliance Jio. All of the private incumbent operators have reduced the staff count. However, state-run telecom operators BSNL and MTNL have remained unaffected but the immense salary burden is turning out to be an Achilles heel for the telcos as they fail to provide February salary on time to staff.