BSNL, MTNL may look at leveraging assets to fix finances

BSNL uses 60 per cent of its revenue in paying its employee’s salaries which has severely hit the company’s profit margins even as its market share has fallen drastically over the years. 

Published: 21st March 2019 07:40 AM  |   Last Updated: 21st March 2019 07:40 AM   |  A+A-

Express News Service

Troubled state-run telecom companies — Bharat Sanchar Nigam Ltd (BSNL) and MTNL — which are expecting a bailout package from the government and thinking of monetising assets, have to come up with an out-of-the-box plan to ensure their survival. The first factor that the companies need to address are salaries, which have become a heavy burden due to their bloated headcounts. BSNL has the largest number of employees among all the telecom operators, but, the company handles only 650 customers per employee, while MTNL handles just 160. These indicate far less productivity than their private sector peers. 

Moreover, BSNL uses 60 per cent of its revenue in paying its employee’s salaries which has severely hit the company’s profit margins even as its market share has fallen drastically over the years. This figure is much higher for MTNL, which mainly operates in Mumbai and Delhi. In the December quarter, the company’s salary cost came in at `577.2 crore and exceeded its revenue of `514.5 crore. NITI Aayog, the central government think tank, has even suggested shutting down the company.

In contrast, however, private players are better off. Airtel, for instance, is managed by about 17,000 staff and has a customer base of 340.25 million. Customers served per employee is a whopping 20,000. Similarly, Vodafone Idea manages around 28,000 customers per employee and boasts a 418.74 million customer base as of December 2018. It has only 12,000 people on its payroll. 

Yet, there is hope for both the firms only if the Department of Telecom gets its act together to address two core issues: debt and employment. Experts believe the two firms may leverage the prodigious assets under their belt in their turnaround plan. The two companies have assets that are hugely lucrative. As of March 2018, BSNL owns land worth `70,000 crore and buildings worth `3,760 crore. 

“With an envious portfolio of assets such as real estate, fibre, towers, etc, these firms enjoy a huge advantage over private peers which they could revamp use to revamp their companies with a different business model,” said a telecom analyst. MTNL chairman P K Purwar hopes to raise around `20,000 crore from monetisation of 49 assets.

Meanwhile, the government is also studying a revival plan for the beleaguered firms. The plan suggests offering employees a voluntary retirement scheme (VRS) and includes monetisation of BSNL’s land assets. DoT also plans to fund VRS packages for BSNL at `6,365 crore and for MTNL at `2,120 crore through bonds, said a DoT official.

What ails india’s public sector telecos

  • Both BSNL and MTNL have a host of legacy issues that need resolving if they are to ensure their survival, including cutting out outsize employee costs
  • Both firms have very low employee productivity figures, far behind that of their peers in the private sector 
  • BSNL uses 60 per cent of its revenue to pay salaries and while MTNL had salary costs of H577.2 crore against revenue of H514.5 crore in the last quarter
  • Each BSNL employee serves around 650 customers and each MTNL worker serves just 160 customers
  • In contrast, customers served per employee is around 20,000 for Airtel and 28,000 for Vodafone Idea, which are two of the top telecom players 
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