The government is making one more effort to revive BSNL. It has announced an impressive Rs 1.64 lakh crore package for the ailing public sector telecom operator. Three years ago, the government had also announced another plan of Rs 69,000 crore to revive BSNL, but that was never fully implemented, nor did it turn around the firm.
The current package sounds very impressive, but the amount is not entirely a cash injection. A good amount of the Rs 1.64 lakh crore comprises administrative allocation of 4G spectrum and debt restructuring. The rest is made up of financial support and viability gap funding. At any rate, it will give the troubled firm some financial leeway to improve operations. Meanwhile, before the government announced the package, BSNL had reduced its bloated manpower, narrowed its loss and turned profitable at the operating level.
While the government expects that BSNL will see a complete turnaround within a couple of years, the optimism is probably misplaced. BSNL has already lost the 4G game to its private sector rivals. All three private sector companies will launch 5G services in some circles by the end of the year, even while BSNL puts together its Pan India 4G network. (Though the government may well end up as the largest shareholder in Vi or Vodafone Idea after the conversion of AGR into equity shares, it is operating as a fully private player for all extents and purposes).
The hurdles BSNL will have to surmount after the government unveiled the new package to remain a viable telecom services operator are daunting. The 2019 revival package envisaged the merger of BSNL with MTNL, the other government-owned telecom operator. It made sense because the creation of two separate government-owned telecom corporations from the Department of Telecom never had any logic behind it. MTNL was asked to provide services in Delhi and Mumbai, while BSNL would do the same in the rest of the country. Both firms ended up as loss-making, inefficient corporations while the private sector players ate into their market share. If they weren’t government companies, they would have died like several private sector players who failed to keep pace in the Indian telecom arena.
Earlier this year, however, the government announced that the merger of MTNL and BSNL was being deferred because of the accumulated debt of the two firms. It is likely that the fresh revival package with debt restructuring and financial support could see the merger going through in the next couple of years, but that is by no means certain.
The problem with BSNL (and MTNL) is that their historical advantages have eroded over the years. BSNL had a wider and deeper reach across the country than any private sector player primarily because most of its rivals were focusing on urban areas with better revenue potential.
For a long time, BSNL, therefore, retained a fairly strong grip in rural areas and even in small towns. Its landline network helped as well. It was also asked to execute a portion of the ambitious BharatNet project to give all Panchayats in the country high-speed broadband access.
The problem is that poor execution has marred its effort. And its stranglehold on rural and semi-urban areas has been reduced considerably because of the march of Reliance Jio, Airtel, and even Vodafone. Its inability to service its customers properly, absence of 4G networks, and therefore inability to give high-speed broadband to its customers have spoiled its reputation. The absence from the key markets of Delhi and Mumbai hasn’t helped.
But BSNL’s biggest problem is the same that plagues all PSUs. Despite being corporations, most PSUs have been unable to break out of the government office culture with little freedom, accountability or prospects for professional growth. In the fast-changing telecom technology arena, the ability to take quick decisions is critical for survival, and BSNL doesn’t have that.
Also, government-owned entities suffer from another issue. They are expected to fulfil the social goals of the government and not just chase revenues and profits. That is why not all decisions are taken purely guided by commercial viability.
It is not that PSUs do not have some excellent employees at all levels. Many of the bigger PSUs have been a happy hunting ground for private companies looking for experienced people in different sectors. Erstwhile PSU employees often do very well after joining the private sector. This is primarily because they offer a better environment to take the initiative and because decision-making is quicker and often the focus is on output and outcome.
In most PSUs, and that includes BSNL, there is not enough operational freedom to take decisions quickly and improve operations. Critical decisions like entry into 4G and bidding aggressively for additional spectrum needs clearance from above. Asset monetisation cannot be done quickly. Nor can a culture of customer orientation and marketing be enforced because of the HR systems and processes.
When the government announces a revival package for any PSU, it rarely tries to fix the basic problem that hinders the PSU in the first place. And that is why few of its revival plans work in banking or aviation.
Prosenjit Datta
Senior business journalist
(datta.prosenjit@gmail.com)