In December 2015, in a written reply to the Lok Sabha, Union Telecom Minister Ravi Shankar Prasad said that his government had no plan to disinvest its stake either in Bharat Sanchar Nigam Limited (BSNL) or Mahanagar Telephone Nigam Limited (MTNL). The government, he said, was keenly monitoring their progress, and looking at revival strategies and had provided financial support to both the public sector telecom operators.
The assurance came against the backdrop of some government moves that drew strong opposition from the BSNL Employees Union (BSNLEU). There is concern over what is seen as the government’s ploy to disinvest in BSNL. The sustained resistance from the employees’ union and the state telecom operator’s creditable performance in the face of stiff competition from private operators have prevented the government from moving ahead with the plan.
In October, the government announced its decision to form a subsidiary tower company of BSNL and in the process hive off 61,000 of the telecom operator’s 75,000 mobile towers. Cell phone towers are BSNL’s most valuable assets. In the government’s view, the formation of a new company will lead to better management of the assets, which are valued at around Rs.22.06 billion. BSNL shares its tower services with other telecom operators and earns revenue by leasing them out. The Forum of BSNL Unions and Associations led by its convener P. Abhimanyu wrote to the Ministry and the Chairman-cum-Managing Director, BSNL, that the move would weaken BSNL operations and was actually a ploy to privatise the telecom operator.
The Cabinet’s approval for the plan was secured as early as August. The Forum came to know of it through the media. The Forum of BSNL Unions took up the issue and has been pursuing it tenaciously. Even earlier there was concern about the future of the state telecom operator. In February last year, 25 lakh signatures were submitted to the Prime Minister as part of a “Save BSNL” campaign.
BSNL’s annual revenues have been sliding for the last five years. It posted profits in three circles, namely Kerala, Jammu and Kashmir, and Odisha in 2013-14. The losses are caused by the telecom operator’s inability to procure equipment on time, which is an outcome of government decisions. In the last five years, it lost thousands of landline and mobile subscribers.
In April 2015, a two-day strike by the Forum of BSNL Unions and Associations to draw attention to the problems of BSNL impressed on the government the need to procure equipment, financially assist the telecom operator, fill vacant posts, refund spectrum charges amounting to Rs.6,700 crore, allot free spectrum to BSNL and initiate 4G services in order to compete with private operators. Among a host of other demands were pleas not to merge BSNL and MTNL.
BSNL provides services to 98 per cent of the country’s villages through its village public telephone network, a service unmatched by any private telecom operator. Yet it has been losing revenue and market share in all forms of services—landline, broadband and mobile.
Despite the problems, BSNL’s 2.5-lakh-strong workforce has somehow kept it going. During the December floods in Chennai, many BSNL landline connections worked when all other forms of telecom connectivity collapsed. Abhimanyu told Frontline that during the floods, BSNL spent huge amounts on running generators in order to keep the services running. It announced concessions to customers, including free STD and local calls. Besides, it provided free use of 100 MB data for a week, rental rebate for seven days and an extension of the billing cycle by a fortnight. One BSNL employee swam through the waters in the airport to restore the leased circuits at a time when private operators shut down their circuits. Notably, both executives and ordinary employees have been involved in attempts to make BSNL services attractive.
Until 2006, BSNL posted an annual revenue of Rs.40,000 crore and profits of Rs.8,000-10,000 crore. It was in fact the number one telecom company in the country until 2007, when the United Progressive Alliance (UPA) government arbitrarily cancelled a tender for procuring equipment to set up 45 million lines. Again in 2010, tenders to procure equipment for 93 million connections were cancelled. Such moves made it virtually impossible for BSNL to procure new equipment. The government’s excuse was “national security” because a Chinese company had offered the lowest price. However, private operators were allowed to procure equipment from the same company.
For five years from 2007, BSNL was not allowed to procure equipment or to expand its business, even as telecom and communications technology made significant advances. Until 2003-2005, BSNL made profits and continued to do so until 2008-09. Since then, however, it has been making losses. The losses amounted to Rs.7,265 crore in 2014-15; Rs.7,019 crore in 2013-14 and Rs.7,884 crore in 2012-13. Despite the overall losses, its operating profit in 2014-15 was Rs.682 crore compared with an operating loss of Rs.692 crore the previous year.
The losses through these years impaired BSNL’s ability to buy cables, telephone equipment, drop wires and broadband modems—all crucial for providing quality service and ensure growth. It formed a vicious cycle, leading to more losses.
BSNL and MTNL have not been compensated by the government for the spectrum they surrendered three years ago. The Forum has also demanded that a payment of Rs.1,250 crore be made to BSNL, a sum already sanctioned in lieu of the discontinued subsidies and the Access Deficit Charge (or ADC, envisaged as a cross subsidy by private mobile operators for use of landline services run by BSNL), which was discontinued in 2008 on a recommendation by Telecom Regulatory Authority of India (TRAI). BSNL also used to receive subsidies from the Universal Service Obligation Fund (USOF) created under the Department of Telecommunications for loss-making connections provided in lakhs of villages under the government’s universal service policy. For the last three years, BSNL has not received any money from the USOF, though the USOF recommended that it should get Rs.1,250 crore.
Despite assurances by the Union government and the Minister in particular that BSNL would not be “allowed to die”, little has actually been done to revive the company. The withholding of the ADC payment and inadequate subsidies from the USOF in recent years have stifled the company’s revenues and operations, to the advantage of its private sector competitors. The latter have expanded their reach in almost every telecom service notwithstanding the controversy over “call-drop” (a situation where the call is lost suddenly but the caller is charged for the full minute). A staff crunch has made matters worse. Abhimanyu said that over 1,50,000 employees retired in the last 15 years but only 30,000 were recruited.
“Decimation of BSNL”
“The government wanted to privatise the Department of Telecom itself, but it could not do so. So the work was outsourced to BSNL, which was created in 2000. The National Telecom Policy took the position that the government was not able to provide telephone connections on demand. So that was how private telecom companies entered the picture to complement the DoT. I have been around since 1994 and have witnessed the gradual decimation of BSNL, which was the number one telecom operator in the country. It still is, in terms of its reach,” said Abhimanyu. In 2009, the then Telecom Minister told a delegation of union representatives from BSNL that he would make every employee a “lakhpati” through employee stock options. The unions did not agree.
The present government’s plan of hiving off BSNL towers to form a subsidiary company has also not gone down well with employee unions, who suspect that the move is meant to benefit private telecom companies. What happened to Videsh Sanchar Nigam Ltd (VSNL), which had a monopoly in the international long distance market before the 2002 disinvestment, is still fresh in public memory. A private entity, after being enlisted as a strategic partner, soon became the major shareholder. The government’s assurance that the proposed subsidiary company will be managed by a board of directors has not convinced anyone as the unions fear that this will pave the way for the induction of a strategic partner, as was done in the case of VSNL.
BSNL, the unions point out, did not raise call charges at a time when other telecom operators did. BSNL also had a late start in terms of operating licences, whereas private operators were given licences as early as in 1995. Within two years of being granted the licence, BSNL offered good competition to private operators. In 2004, it had as many customers as Airtel, Abhimanyu said.
The apprehensions are manifold. The formation of a subsidiary company taking away the main assets of BSNL might also result in a reduction of staff. As conventional methods of disinvestment are either meeting with resistance or not working out to the government’s satisfaction, the formation of a company, it is feared, may be well turn out to be a “back-door” disinvestment ploy.
Telecom is a strategic service. Besides, for the “Digital India” slogan to succeed, rural telecom networks should be expanded, something that only a public sector operator can do. National security is also an important consideration for retaining the bulk of telecom services in the government sector.