How BSNL Went From Market Leaders to a Loss Making Unit

BSNL and MTNL are the oldest telecom service provider in the country. Backed by GOI, they are public companies created to oversee the expansion of telecom services in India.

At one point BSNL was the largest telecom provider in India, reaching out to remotes corners of the country.

Things have slowed down considerably with private companies eating up market share, and Govt. red tapism slowing BSNL down.

History of BSNL

After independence, the Department of Telecommunication (DOT) wanted to provide telecom services to the whole country.

In the year 1986, Maha Nagar Telecom Nigam Limited (MTNL) was established to provide telephone services in two metros – Delhi and Mumbai. The rest of the country was to be serviced by DOT.

In 1999, DOT was further subdivided to DOT and DTS, with the role of DOT limited to policy making and license issuance.

After one year, in 2000, DTS was renamed to BSNL.

BSNL was tasked with providing telephonic service across the country excluding the two metros – Delhi and Mumbai where MTNL called the shots.

BSNL soon became a profit making unit, going on to become the highest earner among Public Sector Units.

The company had a massive infrastructure and was the largest telecom provider in the country.

In 2006-07, BSNL’s profits after tax was Rs 8,000 crore.

At the end of 2007, while competitor Bharti Airtel’s market value was Rs 1,70,000 crore and that of Reliance Communications Rs 1,60,000 crore, BSNL’s market value was about Rs 4,00,000 crore.

Yet by the end of 2010, BSNL was a sick PSU with out of date infrastructure, red tapism, lack of funds and lagging far behind the private competition.

From 2008 – present

The story of BSNL is the story of two halves.

The first half started on 2000 and ended by 2009, when the company saw massive growth and profitablity and was the largest telecom provider in India.

The second half is an altogether different story. It starts late 2009 and continues till date.

It is marred by lack of efficient corporate governance, slow decision making, lack of incentives and huge scams that pulled the company down.

In 2016 the then telecom minister staed that “The increase in revenue
of BSNL and MTNL in comparison to some private telecom companies is less due to reasons including less
aggressive market skills of PSUs as compared to private companies, legacy manpower and delay in
augmentation of mobile telecom network by the firms”

It was true that BSNL did not indulge in marketing the company like private players did. Nor did it adopt deceptive measures to lure cusomers to cheap schemes, which was something that their private counter parts indulged in regularly.

It was also alleged that private players deliberately damaged BSNL lines. The matter even went to parliament.

But more than that, bureaucratic red tapism amd inefficieny played a major part in BSNL’s downfall.

The high speed lines scam that incriminated minister Dayanidhi Maran and the 2G spectrum license scam with then minister A Raja, became a huge political scandal and rocked the parliament.

The allegation was that, A Raja, in collusion with some BSNL top officials, favored a private company Starnet for the Wimax franchise deal.

The Wimax franchise deal was a 2G spectrum allocation deal, carried out by BSNL.

The eligibility criteria for the contract was that the applying company should have a per annum turnover of Rs 100 crore and above.

Starnet allegedly achieved the output through manipulation in balance sheets.

After that all tenders went under strict scrutiny and thing started to slow down at BSNL.

Equipments were not bought at time, decision went to a crawl, salaries were delayed and a host of problems engulfed the once successful company.

The shortage of skilled manpower was another issue plaguing the company. People were absorbed into posititions they were not qualified for.

The technical problems were handled by non-technical staff who had no idea what they were doing!

At a time when private players were strengthening their infrastructure, BSNL was lagging behind. The private companies, with their smart marketing strategies were pulling ahead of BSNL and eating its market share.

Things came to such a pass that when competitors were onto 4G technology, BSNL was still operating in 3G and there were no signs of improvement.

Like all loss maing PSUs, the deteroriating condition of BSNL has persisted over the years and it is now in sick bed!

The challenges ahead

The decision to merge the two companies BSNL and MTNL has been put on hold due to the debt crisis at the two companies.

The Govt. had declared a revival package of Rs. 70,000 crore in 2019, on top of which additional Rs. 37,105 was sought by BSNL in 2021 to meet debt obligations.

There are mutiple challenges to turn BSNL around. The consolidation of BSNL and MTNL was the first step. Then there remains the task of upgrading infrastructure.

The existing non-performing staff can be slowly phased out through Voluntary Retirement Scheme (VRS) – which is it currently doing. And young technical staff will have to be recruited to face technical problems.

Efficient corporate governance, coupled with smart marketing strategy will go a long way to put BSNL back on top of telecom providers.

References:

https://ijed.in/download-article.php?Article_Unique_Id=IJED326&Full_Text_Pdf_Download=True
https://www.thehindubusinessline.com/companies/bsnl-rs-40000-crore-ipo-that-could-have-saved-the-company/article30359506.ece#:~:text=In%202006%2D07%2C%20BSNL’s%20total,at%20Rs%204%2C00%2C000%20crore.
https://www.aninews.in/news/business/bsnl-mtnl-to-rollout-4g-services-based-on-commercial-considerations-minister20220401175809/#:~:text=%22The%20revival%20plan%20inter%2Dalia,and%20core%20assets%20to%20generate
https://www.aninews.in/news/business/bsnl-mtnl-to-rollout-4g-services-based-on-commercial-considerations-minister20220401175809/#:~:text=%22The%20revival%20plan%20inter%2Dalia,and%20core%20assets%20to%20generate
https://www.emerald.com/insight/content/doi/10.1108/IRJMS-12-2021-0179/full/html