Mobile services

Too Little, Too Late for BSNL, MTNL Revival?

India's government has proposed a revival package worth an estimated $10 billion for the state-owned service providers Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL).

Both operators have been struggling. BSNL recorded a loss of 138 billion Indian rupees ($2 billion) in its last fiscal year, while MTNL's loss was about INR34 billion ($495 million). The government's planned revival package includes a voluntary retirement scheme (VRS) for employees. Authorities also want to give 4G spectrum worth INR200 billion ($2.91 billion) to BSNL and may provide as much as INR130 billion ($1.89 billion) in financial aid to support 4G network rollout.

But this effort to revive the fortunes of the two companies may be too little, too late. Both firms have been recording losses for many years. BSNL was recently in the news for a delay in paying salaries to employees. Worried vendors are now chasing overdue payments.

Besides offering an attractive VRS to employees, the government is exploring the option of lowering the retirement age from 60 to 58. The VRS, meanwhile, is likely to be offered to workers aged between 55 and 60.

BSNL's bloated workforce means labor costs are one of its biggest expense items. At the end of March, the operator had 163,092 employees, including 46,597 executives. That makes it one of India's biggest companies by employee numbers. Salary payments, accordingly, were some INR144.9 million ($2.1 billion) in the last fiscal year, accounting for 75% of BSNL's operating costs. With ever-decreasing market share and mounting losses, the company is under pressure to slim down. Yet trade union representatives have previously blocked efforts to cut headcount.

MTNL, meanwhile, looks similarly overstaffed. Despite operating in only two cities -- Delhi and Mumbai, it employs as many as 45,000 people.

Waiting for 4G?
BSNL is struggling partly because it is yet to receive 4G spectrum from the government. That puts it a huge disadvantage to privately owned players including RJio, Bharti Airtel and Vodafone Idea, all of which launched 4G services about three years ago. Unable to compete in the market for higher-speed data services, BSNL continues to lose market share. Even if BSNL and MTNL were given 4G spectrum today, they would have a long way to go to catch up.

Indeed, India is already pressing ahead with plans to conduct a 5G spectrum auction later this year. While Bharti Airtel, one of the country's biggest mobile operators, is shutting down its 3G networks, BSNL is still reliant on that ageing technology.

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One option for authorities would be to close the two state-backed firms. Such plans were apparently considered, but the government would have faced a huge bill due to redundancy payments for the entire BSNL and MTNL workforce. Unions would also undoubtedly fight any such moves. Ravi Shankar Prasad, India's telecom minister, now appears to have backed away from the idea.

Another option could be to monetize resources such as land, towers and fiber-optic infrastructure. This would be a long-term initiative, however, and unlikely to deliver immediate results.

BSNL retains some importance as a connectivity provider in rural and remote areas, with privately owned telcos focusing most of their activities on urban areas and wealthier communities. Old as the infrastructure may be, the BSNL network reaches into some of the farthest-flung parts of the country. For political reasons, its survival could be crucial as authorities try to bring affordable Internet and connectivity services to all Indians.

Gagandeep Kaur, contributing editor, special to Light Reading

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