Trans­for­ma­tional steps to re­vive BSNL

Financial Chronicle - - IN -

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.

Ex­ec­u­tive sum­mary

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.

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