Do we need BSNL?
The Government of India recently announced an INR 89,047 CRORE revival package for BSNL — a public sector telecom operator. This will help BSNL get allotment of 4G/5G spectrum, accelerate the rollout of it’s 4G services throughout the country covering some of the remotest villages & towns in India.
This isn’t the first revival package introduced for BSNL. In 2019, the GoI approved an INR 69,000 crore package to bring stability in the operations of BSNL/MTNL. In 2022, another revival package of 1.64 lakh crore was announced— to fund capex requirements, debt restructuring, settlement of AGR dues etc.
See — to start a telecom business you need DEEP POCKETS. You need to invest in building and upgrading the network infrastructure, buying spectrum for wireless communication, building new technology, invest in human resources, marketing, consistent customer support, and maneuver through the extremely price sensitive markets of India.
Is it prudent to use taxpayers money to keep BSNL alive? If the first two revival packages didn’t work — what guarantee is there that the third one will? How will BSNL compete when it still hasn’t rolled out it’s 4G services while everyone else is already gearing up for 5G?
Let’s take a shot at answering these questions.
Case for BSNL
I’m a little biased, because I believe the Government shouldn’t be in the business of doing business — but the idea here is to take an objective look at things.
I can see the following positives of keeping BSNL alive:
Serving the rural market: People living in rural areas normally don’t have a lot of disposable income. They can’t spend a bomb on internet/data. For private companies, entering specific rural areas might not make business sense. You need an operator willing to incur losses with a larger social service in mind and that’s where BSNL steps in. BSNL is building 20,000 4G towers to cover 25,000 villages which currently have low connectively in line with GoI’s ambition to connect all villages with 4G services by 2024.
Operator of last resort: This is more of an extreme scenario. For e.g. if private players start charging unsustainable call/internet charges. Or go bankrupt. Or if the Chinese gain control of the private telecom operators. For national security reasons, it makes sense to have a Government owned telco in play.
There is some utility in keeping BSNL operational, but you have to ask yourself — at what cost?
Case against BSNL
I’m going to throw some numbers at you.
As per the recent Union Budget, the GoI expects to spend around 10 LAKH crore on Infrastructure development in India. That’s a big number and signals that there is a huge push towards infrastructure development in India.
Another interesting statistic. In the last 4 years — BSNL has received aid (financial + non-financial) worth 3.3 LAKH crore. 3 revival packages. Taxpayers’ money being used to keep an inefficient telco alive.
Here’s why it might not be a good idea to keep BSNL alive:
Delayed 4G rollout: In an era — where private players are thinking of rolling out 5G soon, BSNL hasn’t even rolled out their 4G services. It’s going to be a massive undertaking to catch up with the competition & even though they wouldn’t have any problem getting their hands on premium spectrum, execution is going to be a problem. You can get an idea of how tremendously inefficient the company is from this one metric.
Massively unprofitable: BSNL recorded a net loss of 8,161 crore in FY23 against a net loss of 6,982 crore in FY22. Now you understand why it needs revival packages every couple of years. It’s not making any money. Revenue growth is low. Cash flow from operations are negative. In the last 13 years, BSNL has suffered cumulative losses of INR 1.02 trillion.
BSNL’s profit/loss in the last 19 years Low subscriber base & low ARPU: Average Revenue Per User (ARPU) is a very important metric in the telecom business. It tells you how much your average customer is spending in a month. BSNL’s ARPU is 2.5 times lower than Jio/Airtel and it has been consistently losing market share. [see chart below]
Market share of major telecom players in India over the years. Employee benefit expenses: BSNL’s employee benefit expenses are exorbitant compared to it’s private peers. In 2019, following a massive VRS rollout — BSNL cut the number of employees from 1.8 lakhs to 64,500 in FY21. However, the share of employee costs in total costs is still > 25% for BSNL, whereas for private players this number is around 3-4%. Again, a metric showcasing that BSNL is unable to get the optimum output from it’s employees and still has a bloated workforce.
Conclusion: The GoI obviously knows all the stats that I have listed above, but the question is will they do something about it?
Letting BSNL die would be a political disaster as you would have to fire a LOT of people. Plus, you would lose favor in the rural regions where BSNL provides services at a low cost.
Realistically — I believe BSNL is going to live.
At the cost of the taxpayer. Don’t forget to file your tax returns on time guys.