With its wage bill eating up 55% of revenues as compared to 4-5% for private players, as in the case of Air India and various PSU banks, BSNL can’t hope to turnaround until there is a massive retrenchment of staff.
Talk to anyone in the government about BSNL, and the standard response is that while private telcos are surging ahead, it is the PSU major that is the heartline of rural India. Indeed, it is probably this line of thought that has given BSNL the courage to propose that the government give it 2100 MHz spectrum in 19 circles for free. Based on the last auction price, that is a gift of Rs 13,000 crore—BSNL justifies this by saying that the 4G spectrum will allow it to get better-paying customers which, in turn, will help it generate profits for the government.
But, as Trai data show, just 6.9% of all rural subscribers get their mobile service from BSNL; even of BSNL’s subscribers, just a third are from rural areas. Rjio, which began operations just a year ago, provides services to 9.6% of those living in rural areas; Bharti Airtel offers services to 30% of rural subscribers. Once you contrast this dismal market share with its staggering losses—Rs 4,793 crore in FY17 over Rs 4,859 crore in FY16—you realise that, like Air India, BSNL too has failed to stand up to private sector competition and it too has no real game plan to get out of the morass it is in.
With its wage bill eating up 55% of revenues as compared to 4-5% for private players, as in the case of Air India and various PSU banks, BSNL can’t hope to turnaround until there is a massive retrenchment of staff. Which is why, before doling out any fresh sops for PSUs, the government needs to think of what purpose they serve. In the case of MTNL, whose FY18 losses were Rs 2,973 crore (on revenues of Rs 3,116 crore), for instance, the government needs to spend Rs 9,484 crore in buying it fresh spectrum since its current holdings expire next year in April.
Apart from this being unfair to private sector players, any decision on MTNL’s spectrum will also apply to BSNL’s current spectrum holdings that expire after a few years. Indeed, while evaluating any spectrum deal for BSNL, the government would do well to keep in mind that, even today, BSNL and MTNL are simply squatting on valuable spectrum—while BSNL has around 2.7 lakh subscribers per MHz of spectrum, the comparable number is 6.6 lakh in the case of Bharti Airtel and 6.4 lakh for Vodafone.
Just as massive infusion of equity by the government did not save Air India, merely giving BSNL/MTNL more spectrum for free is not going to solve their fundamental lack of competitiveness. Whether or not the government plans to privatise them, just to keep them afloat requires large-scale retrenchment of staff to begin with.