Bailout queue at govt's door is lengthening: Next, BSNL
The public sector telecom industry is in a mess. Both BSNL and MTNL are under water and may need Air India-like rescues.
The best gift you can give someone you secretly hate is an elephant. It looks generous and huge - but the cost of feeding it will ruin him.
However, what does one make of the UPA government, which loves its public sector so much that it robs them? It is killing them both with carelessness and love.
The fate of the three oil marketing companies - Indian Oil, Bharat Petroleum and Hindustan Petroleum - is too well known to document again. All three are being bled dry in the name of providing subsided diesel, kerosene and cooking gas for the poor. The subsidy bill for 2011-12 is expected to top Rs 1,32,000 crore.
The case of Air India - which is paying the price for Praful Patel's excessive zeal in saddling it with more new planes than it could afford - has also been profusely commented on. Its accumulated losses were in excess of Rs 22,000 crore and outstanding loans were twice as much at Rs 44,000 crore.
But here comes the next basket case - Bharat Sanchar Nigam Ltd (BSNL).
Or, rather, make that two basket cases. Going down along with BSNL is Mahanagar Telephone Nigam Ltd (MTNL), which provides telecom services in the lucrative Mumbai and Delhi circles.
In the year to March 2011, India's public sector telecom torch-bearers were in need of pall-bearers, with losses of Rs 6,384 crore and Rs 2,826 crore, respectively.
Here's the interesting bit: the main reason for this loss is the special favour the government showered on them last year (the elephant gift, so to speak). Well before the UPA decided to auction 3G and broadband wireless access (BWA), BSNL and MTNL were given a year's headstart for 3G: they got spectrum before the auction, with the proviso that once the auctions were done, they could pay for it at the rate the private sector bid for it.
Now, as not-so-proud owners of the elephant, they are going down the tubes.
Thanks to 3G and BWA auction fees, BSNL was stuck with a bill of Rs 18,500 crore and MTNL with Rs 11,098 crore. Now, according to an Indian Express report, both are trying to get the department of telecommunications (DoT) to help them offload the unremunerative circles so that they can stay afloat.
However, it may be too late for that. For BSNL's problems go beyond just hefty payments for 3G spectrum. It seems it was already an overweight pachyderm before they received the 3G gift from A Raja.
An analysis by indiaspend.com, a non-profit alternative journalism initiative, shows that the only thing that's really growing robustly for BSNL is its wage bill: in 2010-11, with 3,57,000 employees, the salary bill bloated from Rs 10,705 crore to Rs 11,075 crore, with leave encashment and medical expenses of staff rising by nearly 50 percent from Rs 1,084 crore to Rs 1,621 crore.
And this in a year in which its major telephone services were in free fall: between them, revenues from basic telephony (fixed and WLL) and cellular services crashed 13 percent from Rs 18,601 crore in 2009-10 to Rs 16,146 crore in 2010-11.
The bright spots in BSNL's life are income from broadband services and leased lines - which together grew from Rs 3,549 crore to Rs 5,133 crore.
But, as the indiapsend.com analysis points out, there may be no nirvana merely from growing broadband revenues. "That (broadband) does not save an organisation reeling under such high costs in an environment where most operators are literally slashing each other's throats."
One number tells the whole story: with 3,57,000 employees, BSNL produces Rs 27,044 crore in annual revenues. Bharti Airtel, with just 5 percent of BSNL's employee strength, had a turnover that was more than twice its size at Rs 59,467 crore. Vodafone, with more than 12 times its revenue globally, has all of 84,000 employees.
The real problem, though, is not that BSNL has too many employees - it does - but that the management does not have a roadmap for growth and revival. In fact, the unions are fretting about the inability of the management to deliver.
In an unusual letter to the PM last year, BSNL's unions sought his intervention to get the company a decent boss - who could act in the interests of the company and not kowtow to politicians. The letter, sent by the Sanchar Nigam Executives Association (SNEA) and the All-India Graduate Engineer Telecom Officers Association, said:
"This company cannot survive under such servile management, which, we are sure, cannot rise above the interests of the lords (ministers and babus). Thus, the issue fundamentally boils down to the induction of the rarest of rare talent on the board, definitely not through the orthodox and primitive mechanism that (the) Public Enterprises Selection Board has in place at the moment...".
The union said the "criterion cannot be just be... seniority, based on redundant performance mechanism" to decide on "top slots to run a gigantic company, virtually in shambles today."
Quite clearly, the letter did not get a useful response. Since then, BSNL has only slid deeper into a mess.
Mr Pranab Mukherjee, get ready for the next basket cases to arrive at your door-step: BSNL and MTNL.
With 3G exploding all over the country picking the right plan can be a little harder than it looks. This is especially true since we have to deal with a plethora of service providers and their in-your-face-ads.