BSNL Goes Cash Negative

[ravi_patent 28]

http://www.thehindubusinessline.com/2010/11/26/stories/2010112650230700.htm

After reporting losses at the end of last fiscal, Bharat Sanchar Nigam Ltd has now gone cash negative further plunging the telecom company into deep financial mess.

BSNL has decided to borrow Rs 3,000 crore to meet routine expenses including salary payments for the current financial year and another Rs 11,000 crore for the fiscal 2011-12.

This comes even as the PSU has asked the Government for a bailout package including full refund of the money paid for 3G and broadband spectrum and financial support for rolling out broadband services in rural areas.

BSNL has been struggling over the past two years owing to delays in buying network equipment, political interference and a messed up roll out of 3G and broadband services despite getting spectrum one year ahead of the other players.

Sliding market share

In 2005-06, the public sector undertaking reported revenues of Rs 36,138 crore from operations, which has reduced to Rs 30,268 crore in 2008-09. Profit from operations has slumped — from Rs 4,230 crore in 2005 to a loss of Rs 1,823 crore for 2009-10. It is also losing market share in the highly competitive market, which has as many as 12 operators.

All this has happened when the telecom sector is growing the fastest in the world. While BSNL's market share has decreased, private operators such as Airtel and Vodafone have tripled their subscriber base.

Since 2005, the public sector unit has been able to buy mobile telephony gear for supporting just about 20 million subscribers due to controversies surrounding the tendering process. Private players, on the other hand, have signed multiple deals during the same period which has enabled them to triple their subscriber base in the last five years.

Union blames management

BSNL's employees union has blamed top officers leading the PSU for the mess and has repeatedly requested the Prime Minister, Dr Manmohan Singh, for intervention.

“This company cannot survive under such servile management, which, we are sure, cannot rise above the interests of the lords. Thus, the issue fundamentally boils down to induction of the rarest of rare talent on the board, definitely not through the orthodox and primitive mechanism that Public Enterprise Selection Board has in place at the moment. The criterion cannot be just Indian Telecom Services seniority, based on redundant performance mechanism which cannot be the parameters to decide top slots to run a gigantic company virtually in shambles today,” the Sanchar Nigam Executive Association had said a letter to the Prime Minister in February.

[Karthik R 246]

Why am I not suprised? BSNL is an example of mismanagement of the highest order.

[kkdeep 6]

With the kind of service these guys provide, They deserve it!!

[sgiitk 32]

High time BSNL was privatised. Even today no on-line payment facility, service cannot be worse, complaints not attended to. Wind them up asap.

[ramtech 47]

High time BSNL was privatised. Even today no on-line payment facility, service cannot be worse, complaints not attended to. Wind them up asap.

BSNL has online payment facility. By registering in bsnl website customer can pay bills online using credit card or debit card which i have made many times.

[raccoon 53]

While I hate BSNL for the form it is in today, I seriously don't think winding it up is what is going to benefit us customers. What goes without saying is something drastic and serious needs to be done about the way it functions and the kind of people that work in it. We need a PSU like it to keep the private players in check!

Edited November 27, 2010 by raccoon

[HetalDP 947]

@Raccoon

I am a BSNL Hater but yes i agree with you we should now support BSNL to have proper Competitive market

[starnet 7]

What else one could have expected after years of loot by A. Raja? He always delayed purchase of equipment by tenders on one pretext or another. Under A. Raja as telecom minister, BSNL has dropped out of the list of top 3 mobile companies.

While on one side Airtel etc. are heavily promoting their services and making their SIM cards available in retail stores in smallest cities and villages, on other side is BSNL where SIM cards are always in shortage. BSNL is still living Gandhi/Nehru era of shortages and scarcity.

[Himanshu Singh 19]

High time MTNL and BSNL are privatised.. I dont see any turn around for them..

[Karthik R 246]

DoT to seek Fin min nod to reimburse BSNL for loss-making rural operations

Kolkata: The telecom department will shortly seek finance ministry approval to reimburse state-owned BSNL for all its loss-making ventures linked to its social obligation .

Reimbursement is being sought to compensate BSNL for its loss-making rural landline operations coupled with additional costs of upgrading all MARR-based village public telephones (VPTs) across its 20-circle footprint, post April 2002.

This will be the first decisive move by Kapil Sibal's telecom ministry to prop up the economic fortunes of the cash-strapped telco, which is tipped to post a near- 2,750-crore net loss in 2010-11.

"The government is exploring ways to improve BSNL's financial position. The Telecom Commission is in talks with the finmin to finalise the total quantum of annual reimbursement for all its loss-making but socially desirable activities. Such reimbursement is proposed to be funded out of the Universal Services Obligation Fund (USOF)," said a senior official in the telecom department.

Matters have come to a head since BSNL will soon stop receiving the 2,000-crore annual subsidy from the USOF that it uses to sustain its rural landline operations.

The telecom department had provisioned this annual subsidy for three years from the USOF, starting calendar 2008, to maintain BSNL's telecoms infrastructure in rural and remote areas across the country. The subsidy had been introduced to compensate the state-owned telco after access deficit charges were withdrawn back in 2008. The subsidy will stop from July 2011.

USOF circles said they were waiting for specific feedback on the precise quantum of annual reimbursement for BSNL's loss-making operations. "We are aware of the reimbursement proposal. But neither the telecom department nor the finance ministry has apprised us about BSNL's specific loss-making activities that will be eligible for reimbursement from the USOF nor the quantum," said an official familiar with the matter.

Via : Economic times

[digitalnirvana 646]

Much required but a stopgap solution, why should a PSU be made to pay for political compulsions? If rural sectors are not lucrative, then why only BSNL should get burdened with providing services there, why not private players are also made to be on level playing field?

[rbdhoot 11]

Its all same as that other Govt. Undertaking.

BSNL must take practical approach by appointing professionals who are from Telecom Background & not like other govt. depts through examinations on subjects like GK / Maths / English etc.

[MOBILE FAN 42]

.........

BSNL has decided to borrow3,000 crore to meet routine expenses including salary payments for the current financial year and another11,000 crore for the fiscal 2011-12.

This comes even as the PSU has asked the Government for a bailout package including full refund of the money paid for 3G and broadband spectrum and financial support for rolling out broadband services in rural areas.

The news is an eyewash.

It is true that BSNL is not in its pink health. But certainly it is not in situation which it has reported or given by this news. BSNL has problems of plenty - marketing, dwindling market share, huge internal burdens like wages, inefficiencies etc.. but dont forget that it is still the largest telecom operator in India. Has widest reach even in rural area and some places it is still enjoying monopoly.

Also dont forget that this is the same organization which is resisting its merger with MTNL and also resisting stake sell by Govt. Believe me, if they come up with an IPO, it will be able to raise may be the biggest money in the world.

Then why this news ?

Because, For nearly two years it is asking the Govt. to refund the money that it was "forced" to pay for 3G license. It has raised the issue at various levels. Now with this result they are once again asking the Govt. to bail them out. Having one of the largest employment generating companies in India, they know that Govt. will think hundred times before privatizing it. They know that even a comparatively small organization like Indian Airlines are not being sold off, Govt. has no option but to bail them out. This is just an arm twisting tactic.