The government’s recently announced its strategy for revival of the loss-making public sector telecommunications providers Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telecom Nigam Ltd. (MTNL). The government’s decision to merge both BSNL and MTNL is a move that should have come long back. BSNL for long had been grappling with many issues that have resulted in halting growth and plunging of revenue. There were many instances this year where we have seen the company delayed giving salaries to the employees. It was evident that the company was struggling and looking for assistance to get back on its feet once again.
There was a time when BSNL was recognized as a Navaratna company and the sole provider of telephone connectivity in India. The telecom company which was once eyeing of achieving a worth of $100 billion has become a sick one, with a total loss of around 90,000 crores. Moreover, with the emergence of new private players and coming of wireless telephony in the 1990s
the company struggled to keep pace with the rapid changes in the industry. In just over two decades the mobile phone revolution has propelled India to the second rank in terms of wireless subscribers. The inundation of the market with private players like Airtel, Vodafone, and Jio has resulted in BSNL losing customers to these service providers. Recently many private service providers have resorted to consolidation through mergers and acquisitions. Smaller rivals faced difficulty to cope with the tariff wars, high bidding cost for spectrum allocation and technology upgradation.
Even though the government showed the intention to revive the ailing company, the movie might have come a little too late. Both the telcos have been struggling to contain their operational costs. Although the voluntary retirement scheme (VRS) may help it in constricting the cost, it is unlikely that this will prove to be the panacea for all its troubles. BSNL is having a workforce of 176,000. The majority of these employees are from an era when the company was dominating the market. It will be difficult to change their mindset and make it suitable for the contemporary challenges of today’s competitive environment. The government’s delay in allocating the 4G spectrum to the company did not ease the woes of the company.
However, the government’s move to revive both BSNL and MTNL comes at a crucial time. Whatever may be the odds, a successful revival of BSNL will have far-reaching implications for the industry. This decision comes at a time when both Airtel and Vodafone-Idea are not only struggling for the sliding market share but also to pay a sum of INR 75,000 crore to the government. The presence of BSNL’s network in remote areas makes it a valuable asset. It also serves the Indian armed force thereby having an implication on national security. Moreover, with the presence of many private networks, it would be more secure and reliable to have a network that is accountable to the state, having its presence in far-flung areas.