Transformational steps to revive BSNL
WITH mounting losses and almost fading chances of any survival with competition heightening up after Reliance Jio's entry, the Department of Telecom mandated IIM- Ahemdabad to give a report on the PSU's road map for survival. The report has been coordinated by Prof Rekha Jain and prepared by Prof Vishal Gupta and Prof Ajay Pandey of IIM-A . Here is the executive summary of the report.
The Indian telecom sector has gone through consolidation and has a high degree of rivalry , especially with the entry of Reliance‘Jio’.
A natural question arises whether BSNL has any strategic role in the sector.
In the long term,three cases for such a role are to ensure : (i) rivalry/competitiveness in the sector should the need arise in future, (ii) continued availability of telecom infrastructure and (iii) coverage to underserved/ strategic areas. In the short term (05 years), there is a need to revive BSNL through strategic transformational initiatives. A decision on the way forward for BSNL after five years needs to be taken based on the review of steps implemented effectively. Of these, the first objective of being an effective rival to retain competitiveness in the sector can be met by BSNL only after substantial transformational steps. The performance needs to be reviewed after five years to judge its suitability for its continuance. In its current form , its marketshare is too low, it has mounting substantial losses and high costs to be able to compete effectively in the sector.
Further, it can be argued that the continued availability of infrastructure can be ensured through appropriate regulatory framework such that the telecom infrastructure is maintained/handed over even if private sector operator(s) cease to exist/operate. However, in the current political and social environment, a project organization created under BSNL be made responsible for the same. Both for the second and third option, too BSNL needs to be restructured dramatically to take care of only under-served/strategic areas or provide continuity of telecom infrastructure as a backstop option.
As far as allocation of 4G is concerned, there is the opportunity cost of 4G spectrum, additional capex for 4G roll-out and risk of continuing with businessas-usual attitude. On the other hand, non-allocation would result in further loss of market-share, revenue and loss of morale among the employees. On balance, we recommend that 4G spectrum may be allocated for 5 years’conditional on BSNL addressing the issues related to man power, real estate monetization/utilization and improvement in marketshare/operating performance.
We make suggestions in the report on some of the issues that need to be addressed immediately by both DoT and the BSNL to enable its revival/restructuring. These include hiving off the infrastructure parts:both tower and fibre,creating a project organization, timely review of the state of BSNL’s performance after five years to see whether to continue with the existing organizational form.
If BSNL performs well and undertakes the suggested measures,we recommend that BSNL be privatized at that point in time. In the current form with its legacy human resources and continued loss-making, there is likely to be little private interest.