BSNL Under Urgent Financial Distress, Sends Out Letter to Government Asking for Help

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Bharat Sanchar Nigam Limited (BSNL), the state-led telecom operator has been suffering financial losses ever since the Mukesh Ambani led telecom operator Reliance Jio made its foray into the industry. The government led telco has been under distress and has now sent an SOS to the government, as it is now finding it “nearly impossible” to continue with the operations of the company. The telecom operator currently has an Rs 850 crore liability for June in the name of salaries to its employees, in addition to the Rs 13,000 crore of liabilities which has put a lot of financial pressure on the company.

BSNL Under Accumulated Losses of Rs 90,000 Crore

Puran Chandra, senior general manager at BSNL’s corporate budget and banking division, in a letter to the joint secretary in the telecom ministry (who also sits on the board of BSNL) said, “The gap between monthly revenues and bare expenses to continue operations as a going concern has reached to a level where continuing with the BSNL operations would be nearly impossible without immediate infusion of adequate equity.”

In its letter which was sent last week to the government, the officials have sought advice about the fate of the company and the last course of action, for saving the distressed company. It is also worth noting that BSNL is country’s top loss-making PSU and as per a report filed by Kotak Institutional Equities, BSNL’s accumulated operational losses surpassed the figure of Rs 90,000 crore by the end of December 2018. This news was first reported by Times of India.

Lack of 4G Network Major Reason for BSNL's Losses

There have been intense talks about the revival of the company, but even then, the government has failed to provide a definite pathway for the company to follow. Also, when asked about closing down the loss-making corporation, the government has dismissed the talks citing strategic reasons. Notably, BSNL has been under reeling losses, and some of the reasons include high employee costs, poor management functioning, unwanted and often misdirected government interference, and delays in modernisation plans. One of the significant reasons why BSNL has been led down this path also includes the absence of a 4G network. The telco only has 4G network in selected places, whereas the government is already looking forward to 5G spectrum auction.

The stats also say that the number of subscribers of BSNL has halved since 2004-2005 and it currently stands at the 10% mark. Unlike private telecom operators, BSNL does not have a high ARPU (Average Revenue Per User). Also, as opposed to Airtel, which only spent 3% of its revenue on personnel expenditure, 66% of BSNL’s revenue was spent on employee benefits, retirement benefit accruals and more. The suppliers and lenders have also stated that it is hard to recover dues from BSNL as the telco does not pay. Former VSNL chairman and telecom industry analyst, BK Syngal has said that it might be better for the company to shut down in case things do not improve. He remarked that MTNL is already dead and BSNL is now in critical condition.

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Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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