BSNL Suffers First Annual Loss

Staff wage increases and the intense mobile tariff war in India pushed state-owned Bharat Sanchar Nigam Ltd. (BSNL) into the red during its financial year 2009-2010, which ended March 31.

The operator, which provides fixed and mobile services everywhere in India except New Delhi and Mumbai, recorded a net loss of 18.2 billion Indian rupees (US$393 million), compared with a net profit of INR5.75 billion ($120 million) in the previous fiscal year.

The operator, India's fourth-largest mobile operator by subscribers, also reported a precipitous dip in revenues, down 10.4 percent to INR320.5 billion ($6.9 billion), compared with INR358.1 billion ($7.7 billion) in 2008-2009. (See India Adds 18M Subs in June.)

This is the first time the carrier, which is currently looking for a new chairman and managing director (CMD) following the retirement of Kuldeep Goyal on July 31, has reported an annual loss since its inception in 2000. (See BSNL's Chief Issues Parting Shot.)

Wage revisions implemented during the financial year tipped the company, which employs about 300,000 staff, into the red. The operator introduced a new salary scheme and backdated payments for the past three years, a move that cost it about INR29 billion ($600 million).

BSNL will struggle to report a net profit in the current financial year, as it has paid billions for its 3G and BWA (broadband wireless access) spectrum following the recent auctions. (See India's BWA Auction Ends in $8.2B Drama, India's 3G Auction Ends, Raises $14.6B, and MTNL, BSNL Prep for 3G Battle .)

BSNL has shelled out INR83.1 billion ($1.8 billion) for its BWA spectrum, and nearly INR102 billion ($2.2 billion) for its 3G capacity.

However, the operator is pushing hard for a refund of at least part of those payments, and many in the industry expect BSNL, and its sister state-owned operator Mahanagar Telephone Nigam Ltd. (MTNL) , to be handed back some of the spectrum fees.

One area of growth has been fixed broadband, where the carrier generated revenues of INR24.8 billion ($530 million), 47 percent higher than the previous year. BSNL currently has about 6 million DSL customers, and is investing further in its copper and fiber-based broadband capabilities to grow its fixed broadband subscriber base in the coming years. (See WiMax, 3G to Dominate India's Broadband Future.)

Even with the growing potential of services such as broadband, BSNL clearly needs to revamp its operations. One external report recommends that the carrier should cut its workforce by a third to reduce costs and plan an IPO to raise cash. (See IPO Not the Cure for BSNL's Ills.)

All of which means it's important that BSNL hires a new CMD as soon as possible, so that decisions can be made. Human Resources director Gopal Das has taken the helm until a new CMD is appointed. (See BSNL Faces Exec Crisis and BSNL to Split Top Role.)

— Gagandeep Kaur, India Editor, Light Reading