Intra-circle roaming has to be a big part of this
Given public sector BSNL’s huge and continuing losses, it is not difficult to lose hope about ever reviving it. The last time BSNL made profits was in FY09 when it made Rs 575 crore. Losses rose dramatically to Rs 8,851 crore in FY12, and then stabilised marginally at Rs 7,884 crore in FY13 and Rs 7,019 crore in FY14. While privatisation seems a neat solution to offer, with 2.3 lakh workers, it poses an almost insurmountable political problem, apart from the fact that few buyers have the appetite to take over a firm like BSNL. Rival Bharti Airtel, to put some context, has under 25,000 workers and while Bharti Airtel’s wage bill is 2.6% of its turnover, that for BSNL is 55%—in other words, BSNL will have to raise its revenues almost 20 times without any commensurate rise in wages to reach Bharti’s level of competitiveness. Given that privatisation is not even a remote possibility, the government has no option but to try to revive BSNL and that is what telecom minister Ravi Shankar Prasad got the Cabinet to agree on earlier this week.
Reviving BSNL, needless to say, will involve really sweating its assets which means BSNL has to completely junk previous monopolistic policies and the government will need to help by changing some antiquated and meaningless rules. The revival strategy has to revolve around both increasing top-line as well as retiring workers through natural attrition as well as voluntary retirement schemes (VRS). The Cabinet has done a good job to agree to hiving off BSNL’s towers business. At 40,000 towers across the country, BSNL has one of the largest networks and should be able to get a good value for it—of course, the exercise has been delayed for so long, it has allowed other tower companies to get a leg up. A number of Rs 20,000 crore is doing the rounds as the possible value of these towers. BSNL also has 403 lakh square metres of free-hold land that also needs to be monetised to pay for VRS.
While the landline business is a declining one, it remains true that BSNL has not achieved its full potential by converting users to broadband internet users. Given its poor record in doing this, it may be a good idea to try to use third-party vendors to set up and market its broadband services. Setting up a services company along the lines that Air India did with its engineering services is also something worth exploring, and that will also lower the wage bill for the parent firm. BSNL’s biggest asset, of course, is its spectrum and, thanks to its poor customer base, this is poorly utilised. While BSNL has 287.7 MHz of spectrum across the 900/1800 MHz bands with 77.6 million subscribers translating to 2.7 lakh subscribers per MHz, the comparable number is 6.6 lakh in the case of Bharti Airtel and 6.4 lakh for Vodafone. While BSNL’s 3G spectrum would be worth R12,000 crore for its residual life, BSNL cannot surrender it since it has to be able to offer value-added services to subscribers. BSNL can, however, hope to make good money through spectrum sharing provided the government changes its rules to allow intra-circle roaming for 3G—even after the TDSAT slammed the government for banning intra-circle roaming, it went in appeal to the Supreme Court. Indeed, given BSNL’s network, entering into intra-circle roaming pacts with existing telcos in even the other frequencies—900 and 1800 MHz—will be quite lucrative though this cannot happen till the government changes its ill-advised rules to allow this only for ‘liberalised’ spectrum.