August marked an important transition at Bharat Sanchar Nigam Limited (BSNL). Gopal Das took over as chairman and managing director (CMD) of the state-run, integrated telecom service provider, following the retirement of former CMD Kuldeep Goyal. His appointment is being looked upon with much anticipation as a lot rides on him. The once-coveted telecom operator has been on a downward spiral and Das will need to dip into every resource and skill he has acquired during his 35-year-long telecom career to turn the company around. In spite of operating in the world’s fastest growing telecom market and having held a leadership position in this space till 2008, BSNL has over the past two years been struggling to hold its own in the face of fierce competition from nimbler private sector operators. BSNL’s sliding performance has become a cause of concern for its management and the government, which has 100 per cent stake in the company. Pushed to the fifth position in the mobile telephony pecking order, BSNL had 73.78 million subscribers as of July 2010, against Bharti Airtel’s 139.22 million, Reliance Communications’ (RCOM) 113.31 million, Vodafone Essar’s 111.46 million and Tata Teleservices’ 74.84 million subscribers. BSNL’s mainstay – its landline business from which it still derives 63 per cent of its revenue and in which it has nearly 80 per cent market share – has also been giving way over the years. Subscribers are less and less interested in fixed line phones. In 2009, the company lost as many as 1.1 million wireline subscribers. And the slide is expected to continue. Recently, the IT and communications minister, Sachin Pilot, stated that BSNL’s studies to ascertain the reasons for the mass surrender of connections would help the company assess and optimise the future growth potential. Once a serious contender for the top slot in the country’s booming mobile industry, the company has, in the past few years, been facing a debilitating capacity crunch. Its last major network expansion was undertaken in 2005. Thereafter, every effort to procure equipment was either thwarted or got mired in controversy, leading to delays. Moreover, frequent tariff cuts, unrelenting competition, discontinuation of the licence fee reimbursement, bureaucratic delays, long tendering processes and governmental interference all added to the operator’s difficulties. Today, most of BSNL’s businesses, excluding rural telephony, broadband and internet, are under severe pressure. To cap it all, BSNL has, for the first time since its corporatisation in 2000, suffered a loss of Rs 36 billion for fiscal year 2009-10. Its gross revenue declined to Rs 335.47 billion for the year ended March 31, 2010 as against Rs 339.83 billion in the previous fiscal year. While the management blames this decline on higher wage expenditure and lower landline revenue, it perhaps realises that the company needs a complete transformation and realignment to get back on track. Need for overhaul
Concerned that BSNL may go the way of Air India or other loss-making public utilities, early in the year, the company decided to bring in Sam Pitroda to draft a recovery road map. The review panel headed by Pitroda submitted a 15-point report to the Department of Telecommunications (DoT), suggesting options for reviving the company. These included a strategic stake sale of 30 per cent; pruning staff by a third; splitting the fixed line business from the more rapidly growing mobile business and thereafter listing the latter on the stock exchange. The panel also suggested hiring outside professionals for key management positions. However, though remedies had been sought, they were rejected as BSNL’s highly unionised workforce made the implementation of any changes difficult. There was, for instance, no way that the 300,000 employees would agree to the voluntary retirement of over 100,000 workers. While, the move would have made the operator leaner and would have helped in cutting back...
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