27-10-2012: What is missing in BSNL, MTNL turnaround proposals...?..news

BSNL and MTNL, the two telecom PSUs that kept making losses even as their private sector counterparts cashed in on the boom, have plans to revive their fortunes, but not from their core business. Both the companies have for long been at the receiving end of exploitation by staff unions and politicians. (Gifting of 323 telephone lines by DMK leader Dayanithi Maran, communications minister in UPA-1, to Sun TV Network, a company owned by his brother Kalanithi Maran, is a glaring example of political intervention in the functioning of BSNL. Read the story here.) In their bid to turn around, both BSNL and MTNL are now planning to monetise their real estate assets. BSNL has made proposals to this effect to Telecom Minister Kapil Sibal. The plan include utilisation of its real estate, monetising of towers assets, utilisation of its factories for revenue generation, providing broadband connectivity to schools and leasing out its CDMA network, a report on CNBC TV18 said. Bharat Sanchar Nigam has drawn up plans to lease its real estate assets to developers as it looks to recoup revenue and mounting losses. Both BSNL and MTNL have invited bids from consultants to advise them on monetising their real estate assets, according to a report in The Economic Times. The report says BSNL, which has a huge land bank of 4,400 hectares, will take a final decision on the consultant by 15 November. BSNL plans to develop its land commercially and it has started pilot projects in 10 locations, according to a report in Business Line. It eyes Rs 250 crore as rental income every year. Over the last five years, BSNL and MTNL have drifted from profit to losses. In 2007-08, BSNL had a profit of Rs 3,009 crore and MTNL Rs 5,889 crore. In 2011-12, the companies made Rs 8,851 crore and Rs 4,109 crore losses, respectively. This is in stark contrast to the private sector players which were able to cash in on the telecom boom over the same period. These proposals may work for these companies, given the high realty prices. But are they a long-term business strategy for furthering their core business? Probably not, because these proposals fail to address the core issues, like the sky high staff cost, that are putting a drag on these PSUs. According to a report in the Economic Times, both the companies have a combined staff strength of nearly 2,50,000 and their salaries make up nearly 50% of their aggregate revenues. In comparison, their private sector peers spent 3-4 percent of their revenue on staff salary. Adding to the worries is the huge investment they made in the 3G services, which are yet to take off. Both the companies had to invest a total of about Rs 30,000 crore for the 3G spectrum. However, it is not impossible for these companies to devise a turnaround plan. BSNL has a huge land line subscriber base and also reach to the remotest areas in the country, which it can take advantage of. But for all these, the government needs the will to ring fence them from politician intervention.