CONTENTS

Page no.

1. INTRODUCTION 2

2. OBJECTIVE OF STUDY 4

3. METHODOLOGY AND LIMITATION 5

4. BSNL- 4.1 ABOUT THE THE COMPANY 6 4.2 ITS HISTORY 6

5. THE STRUCTURE AND OVERALL STUDY 5.1 CAPITAL EXPENDITURE, 9 5.2 STRUCTURE 12

6. THE FALL OF THE GIANT- REASONS NOT ONE BUT MANY 17

7. STUDY OF THE FINANCIAL DATA AND THE REASONS FOR THE FALL 24

8. PLANS FOR REVIVAL 8.1 MERGER 30 8.2 DIVESTMENT 31 8.2.1. EMPLOYEES STRIKE 32 8.3 OTHER STEPS 35

9. FUTURE PROSPECTS 36

10. REPORTS BY JP MORGAN 37

11. FINDINGS OF THE STUDY 39

12. CONCLUSIONS AND SUGGESTIONS 42

13. BIBLIOGRAPHY 43

14. ABBREVIATIONS 43

15. ANNUAL REPORT FOR 2010 44

1. INTRODUCTION

When the Titanic was being built, no one in the US would have thought in their wildest dreams that the ship would sink in its maiden voyage; nor would have the Palestinians thought that the mighty Goliath could be defeated by a small shepherd boy. India could soon have its own Titanic-like story in the form of Bharat Sanchar Nigam Ltd. The telecom behemoth, which once upon a time was the largest telecom player in the country, is today in a sorry state.

In this study which deals with BSNL and from what the company was, to where the company was to go and to where it landed eventually. It was all the result of the slow growth shown by BSNL in response to high growth in the Telecom sector of India and among its other major competitors and key players of the same sector like Bharti Airtel and Reliance, that the company today can be aptly titled as India’s Titanic. The recent scheme introduced by the company which allows the subscribers to switch over their operators without changing their numbers at a nominal cost has also had a huge impact on the company’s performance.

The company has lost 6 million fixed-line telephony subscribers in the last three years. In June 2006, it was within shouting distance of the top spot in the mobile telephony business in terms of subscribers. But then the slide began and today BSNL is down at the number four slot in the GSM category. All this happened when the telecom sector was growing the fastest in the world. While BSNL's market share decreased, private operators such as Airtel and Vodafone tripled their subscriber base. In 2008, BSNL lost the top spot in terms of revenue to Bharti Airtel.

So, like Titanic, did BSNL also hit a large iceberg that has sunk the company so close to being bankrupt?

Dr D.P.S. Seth, the first Chairman of BSNL, says “the political interference and subsequent delays in procuring network equipment at the right time is the most important reason for the way the telecom PSU's performance has nosedived”.

The learned man also added in one of his recent interviews that “For a telecom operator to be successful it has to roll out a network that can support the subscribers. This has to be done at the right time. How can BSNL compete with the private players when it is not allowed to buy the equipment for three-four years?”

2. OBJECTIVE OF STUDY

The basic objective behind every study is to enhance our knowledge in the subject. Since long, I have had an urge to study about this Indian giant and to gain enough knowledge about why it fell and also the key factors that played an important role for its sustenance even at such dreaded times.

Since long, we have witnessed that many of the Indian major PSUs are not able to perform well. The best examples of this are: AIR INDIA, which often comes out with a different merger and demerger scheme, and also BSNL. The reasons these companies are not able to survive, not denying the fact that they have huge capital investments and monopoly in their sectors, are unknown to many.

BSNL, which was once a company enjoying the top slot in the telecom industry to a company today which is incurring huge losses and is heavily dependent on the government subsidies, have had a great history behind; having such a great position in the past and enjoying all the support required from the ministry of telecom, government of India, one question that comes to the mind of every Indian ‘What made BSNL land into a loss making company?’.

The objective of the project is to study all the variables acting behind it and to find a suitable answer to the above question through proper analysis and interpretation.

3. METHODOLOGY AND LIMITATION

This project is a reproduction of data, mostly secondary data collected and compiled from various websites and magazines. Some websites like that of THE HINDU and BSNL official website and also some magazines and periodicals like the INDIA TODAY and THE ECONOMIC TIMES , provided me a lot of data for the compilation.

My mentor and project guide, Mr. P.P.Ghosh also helped me with various data and sources from where I could collect enough of the inputs. I have also made a study on the employees strike in BSNL against Divestment in depth and also have gone through the Annual Report of BSNL which has been attached to this project.

Limitations

Like any compilation of secondary data faces, even I faced many problems while making my project. I, many a times, ran short of data and so could not express my views very vividly. There was also a time constraint on my part owing to which I could not produce much data in my project. Also, some data I found seemed to be irrelevant to the topic and so could not make a space in the compilation.

I had been to the BSNL’s area manager’s office, located at P9/10, Ganesh Chandra Avenue. Kolkata-13, several times. But could not benefit much from it, the only information that I got from there was the annual report of BSNL for the year ended March 2010.

4.Bharat Sanchar Nigam Limited

4.1 About the company

Bharat Sanchar Nigam Limited (abbreviated BSNL) is a state-owned telecommunications company headquartered at New Delhi, India. BSNL is one of the largest Indian cellular service providers, with over 83.6 million subscribers as of January 2011, and the largest land line telephone provider in India. However, in recent years the company's revenue and profit plunged into heavy losses due to intense competition in the Indian telecommunications sector.

BSNL is India's oldest and largest communication service provider (CSP). It had a customer base of 90 million as of June 2008. It has footprints throughout India except for the metropolitan cities of Mumbai and New Delhi, which are managed by Mahanagar Telephone Nigam Limited (MTNL). As of June 30, 2010, BSNL had a customer base of 27.45 million wireline and 72.69 million wireless subscribers.

4.2 History Till Date

Bharat Sanchar Nigam Ltd. formed on October, 2000, is World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India: Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Presently it is one of the largest & leading public sector unit in India.

BSNL then known as ‘Department of Telecom’ had been a near monopoly during the socialist period of the Indian economy. During this period, BSNL was the only telecom service provider in the country MTNL was present only in Mumbai and New Delhi. During this period BSNL operated as a typical state-run organization, inefficient, slow, bureaucratic, and heavily unionised. As a result subscribers had to wait for as long as five years to get a telephone connection.

The corporation tasted competition for the first time after the liberalisation of Indian economy in 1991. Faced with stiff competition from the private telecom service providers, BSNL has subsequently tried to increase efficiencies itself. DoT veterans, however, put the onus for the sorry state of affairs on the Government policies, where in all state-owned service providers were required to function as mediums for achieving egalitarian growth across all segments of the society. The corporation (then DoT), however, failed miserably to achieve this and India languished among the most poorly connected countries in the world.BSNL was born in 2000 after the corporatisation of DoT. The efficiency of the company has since improved little a bit.

However, the performance level is nowhere near the private players. The corporation remains heavily unionised and is comparatively slow in decision making and its implementation, which largely acts at the instances of unions without bothering about outcome. Management has been reactive to the schemes of private telecom players.

Over the past ten years BSNL's management is not able to absorb Group A(ITS) officers, who are working in BSNL illegally as borrowed staff. BSNL board having cronyism in its attitude, has not relieved unabsorbed ITS officers from BSNL despite knowing the fact that their deputation in BSNL is over on 22/12/2008 and they are to be delieved from BSNL as per Department of Personnel and Training (DOPT) Order dated 26/11/2006.

DOPT Order dated 26/11/2006 inter-alia states that

(1) On completion of deputation period, the deputationist officers will be deemed to have been relieved from the borrowing organisation; (2) If deputationist officers do not report back to the parent department, the disciplinary action must be initiated against him; and
(3) The perion of overstay on deputation shall not be treated as qualifying service for the purpose of retirement benefits.

This is how the unabsorbed ITS officers are sitting illegally in BSNL despite clear orders. This has considerably reduced the ability of management to take risks and get rewarded in open telecom field. Though it offers services at lowest tariffs, the private players continue to notch up better numbers in all areas, years after year. BSNL has been providing connections in both urban and rural areas. Pre-activated Mobile connections are available at many places across India. BSNL has also unveiled cost-effective broadband internet access plans (DataOne) targeted at homes and small businesses. At present BSNL enjoy's around 60% of market share of ISP services.

BSNL has installed Quality Telecom Network in the country and now focusing on improving it, expanding the network, introducing new telecom services with ICT applications in villages and wining customer's confidence. Today, it has about 46 million line basic telephone capacity, 8 million WLL capacity, 52 Million GSM Capacity, more than 38302 fixed exchanges, 46565 BTS, 3895 Node B ( 3G BTS), 287 Satellite Stations, 614755 Rkm of OFC Cable, 50430 Rkm of Microwave Network connecting 602 Districts, 7330 cities/towns and 5.6 Lakhs villages.

BSNL is the only service provider, making focused efforts and planned initiatives to bridge the Rural-Urban Digital Divide ICT sector. In fact there is no telecom operator in the country to beat its reach with its wide network giving services in every nook & corner of country and operates across India except Delhi & Mumbai. Whether it is inaccessible areas of Siachen glacier and North-eastern region of the country. BSNL serves its customers with its wide bouquet of telecom services.

BSNL is numero uno operator of India in all services in its license area. The company offers vide ranging & most transparent tariff schemes designed to suite every customer.
BSNL cellular service, CellOne, has 55,140,282 2G cellular customers and 88,493 3G customers as on 30.11.2009. In basic services, BSNL is miles ahead of its rivals, with 35.1 million Basic Phone subscribers i.e. 85 per cent share of the subscriber base and 92 percent share in revenue terms.

BSNL has more than 2.5 million WLL subscribers and 2.5 million Internet Customers who access Internet through various modes viz. Dial-up, Leased Line, DIAS, Account Less Internet(CLI). BSNL has been adjudged as the NUMBER ONE ISP in the country.

BSNL has set up a world class multi-gigabit, multi-protocol convergent IP infrastructure that provides convergent services like voice, data and video through the same Backbone and Broadband Access Network. At present there are 0.6 million DataOne broadband customers.

The company has vast experience in Planning, Installation, network integration and Maintenance of Switching & Transmission Networks and also has a world class ISO 9000 certified Telecom Training Institute.

BSNL have started 3G services in 290 cities and acquired more than 6 Lakh customers. It had planned to roll out 3G services in 760 cities across the country in 2010-11.

5. Overall study of the company:

BSNL which surely is a company aspiring to be the leading Telecom Service Provider in India with global presence by creating a customer focused organisation with excellence in sales, marketing and customer care is moving towards the process by leveraging technology to provide affordable and innovative products/services across customer segments and Providing a conducive work environment with strong focus on performance and also by establishing efficient business processes enabled by Information Technology.

5.1 Capital expenditure, Asset deployment;

“Bharat Sanchar Nigam Ltd proposes nearly Rs 14,800 crore of capital expenditure this year, a third of which will be on mobile infrastructure”, said BSNL's ex-Chairman and Managing Director, Mr. Kuldeep Goyal while addressing their general meeting for 2009-10. And added to his statement at a function held for launching BSNL Live Portal (for South), a value-added service for 2G and 3G mobile users that ‘The telecom major will invest roughly the same amount next year also.’ The BSNL Live portal is a one-stop-shop providing information, entertainment and communication-related requirements. It offers video on demand, music, and multimedia games, says a press release.

In his words, BSNL had expected to close 2009-10 fiscal with revenues of around Rs 35,800 crore of which nearly Rs 10,000 crore was to come be from mobile. Hence, BSNL was aiming to focus more on the mobile telecommunication sector and this was evident from the fact that there were nearly 120 million television sets and 70 million cable connections as against 580 mobile connections by the end of the year 2010.

This year, BSNL is planning to expand its 3G broadband reach to nearly 750 cities from the current 350. Moving forward to which there are nearly 50,000 towers across the country for 3G network, also out of 29,000 telephone exchanges in the rural areas, 24,000 have broadband capability.

As per the annual reports of the company, Bharat Sanchar Nigam Limited has net fixed assets valuing more than Rs. 54,321 Crores (US $ 10.67 billion), which are in the form of Land, Buildings Cables, Apparatus & Plants etc. as on 31.03.2009.

Gross Investment in Fixed Assets

The BSNL is making substantial investment year to year for its network expansion and modernization. During the last financial year BSNL has made the gross investment of Rs. 28,227 crore ( US $ 6.28 billion) in Fixed Assets. This is evident from the graph given below which shows a substantial increase in the investment in fixed assets from 8,613 crores in 2008-2009 to 28,227 in 2009-2010.

[pic]
Source: BSNL official website.

Cumulative Capital Outlay

BSNL had Gross Fixed Assets of over Rs.1,32,243 Crores as on 31.03.2009 whereas the same as on 31.03.2010 was Rs.1,60,470 Crores and same is supported by the graph below:

[pic]Source: BSNL official website.

5.2 Structure.

Composition of Board of Directors of the Company.

The Board comprise of 12 Directors, of which 6 [including the CMD] are whole time Directors; 2 Government Nominee Directors and 4 Non-official Part Time Directors. Thus, the Board has the optimum mix of 50% Whole-time and 50% part-time Directors. The composition is as per Corporate Governance Norms for the unlisted CPSEs, laid down by the Department of Public Enterprises.

Chairman & Managing Director- Shri S. C. Misra

Director - Consumer Fixed Access(CFA)- Shri Rajesh Wadhwa Shri Rajesh Wadhwa took over as Director (Operations) in BSNL on 1st August 2008. Shri Wadhwa is a B. Tech in Electrical Engineering in first class with distinction from I.I.T. Delhi. He has also done MBA from Faculty of Management Studies, University of Delhi. He joined the Department of Telecommunications, Government of India through Indian Telecommunications Services Group ‘A’ in December 1975. Since then he has worked in various capacities in different units of DoT/ BSNL/MTNL and has versatile experience covering almost all the fields in telecommunications including operations, development and management of landline and mobile networks, sales and marketing and financial management etc.

As Director (Operations), BSNL, he is mainly responsible for improving the Systems and Methods to achieve optimal performance and maximum utilization of BSNL's extensive country-wide Infrastructure and network. He is also responsible for achieving short-term and long-term business interests of the Company by way of high customer satisfaction and timely provision of satisfactory and quality services through close coordination with various field units. He is also responsible for induction and adaptation of new technologies and managing technological changes and providing state-of-the-art modern and world class integrated telecom services in the highly competitive environment.

Director - Consumer Mobility(CM) & (Enterprise)- Shri R.K.Agarwal Shri Rakesh Kumar Agarwal has done his B.E. from Indian Institute of Science, Bangalore in 1973 and then M.Tech in Communications from IIT Delhi in 1975. Thereafter he joined Department of Telecommunications and worked in various fields of telecommunications. He did installation of C-400 Cross Bar Exchanges till 1983. He was sent to France for training for the installation of Digital Electronic Exchange of E-10B make in 1983 and thereafter worked as Deputy General Manager (Installation) for E-10B Exchanges in MTNL, Mumbai from 1983 till 1991.

Shri R.N.Jha, Govt. Director
Shri. Rabindra Nath Jha was appointed as Government Nominee Director on the Board of Directors of BSNL with effect from 12.2.2010. Presently Shri Jha is Deputy Director General (International Relations), Department of Telecommunication, Ministry of Communications & IT, Government of India. He is a councilor from India in the International Telecommunication Union (ITU) Council. He was elected as the Vice-Chairman of 2009 Session of ITU Council. He is also on the board of Directors of TCIL (Telecom Consultants India Ltd.).

He worked as Divisional Engineer (Internal) in Ahmedabad Telecom District and maintained internal as well as external plant of Telecom Network of Navrangpura Telephone Exchange. As Divisional Engineer (Rural) and Divisional Engineer (Planning) in Patna Telecom District, he had been responsible for planning Telecom network and dimensioning the exchanges. As Deputy General Manager, MTNL Delhi, he had been maintaining the external plant network of Central and Jorbagh areas two very important localities of Delhi. He was also posted as Director (Engineering and Network Planning) in TEC and had been instrumental in formulating National Plan for ‘Switching’ and ‘Routing’. Also, forecasted the TAX capacity both of level I and Level II of all the Secondary Switching Area including MTNL Bombay and Delhi. Further, he worked as Director (OSP), DOT and had been instrumental in formulating guidelines for the registration of Call Centers under OSP categories. He organized India National Pavilion in ITU Telecom Asia, Hong Kong in the year 2002, ITU Telecom World in Geneva in 2003 and Supercomm in Atlanta in the year 2003.

Shri Sanjiv Gupta, Director
Shri Sanjiv Gupta, 46, an alumnus of IIT Delhi, has had a long and distinguished career in marketing and operations in diverse categories.
A Chemical Engineer, Shri Sanjiv started professional career with Hindustan Lever Limited in 1984 and very quickly moved across the organisation in Sales and Marketing. In the last two years of his stint, he was the National Media Manager for the whole Unilever Group in India to consolidate buying and negotiation across all group companies and profit centres to tackle the imminent privatization and mushrooming of media. He joined the Coca-cola company in India in 1997 as Vice-President Marketing and was instrumental in providing a bold new direction to its marketing campaigns; connecting with consumers with relevant brand messages like never before"!
Shri Ashish Guha, Director
Shri Ashish Guha entered upon the office of Director of the Company wef 21 st May 2010. Shri Ashish Guha joined HeidelbergCement Group in August 2006 as the Managing Director of Heidelberg Cement India Limited. Mr.Guha consolidated Heidelberg Cement’s entry into India and has been instrumental in transforming the businesses of the acquired companies.

Mr.Guha has been involved with various industry forums like Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI) and has represented India as a delegate in many nations. He was also an active participant in the World Economic Forum at Davos in the late90’s. He has been part of many Government bodies including the one on Privatisation.
Mr.Guha is an Honours Graduate in Economics and an alumnus of London Business School.

Staff
Distribution of Group-wise staff strength of BSNL (numbers) as on 31st March 2009 is indicated below: [pic] Source: BSNL official website.
**Including 2773 nos. Industrial Workers

6. The fall of the giant- reasons not one but many

“Every time BSNL wants to buy an equipment there are hundreds of questions asked by everyone on issues related to irregularities and allegations of corruption. If the Government has appointed a Chairman and a Board then it should allow them to take decisions freely. Yes, they need to be accountable, but just like private operators are accountable to their stakeholders and respond to queries once a year in the annual general body meeting, a PSU should also be given the flexibility to function independently and then stand scrutiny of the Government agencies once a year. At present the scrutiny on PSUs is on a daily basis. In a year the Chairman of BSNL, in general, spends 260 days responding to such queries, so when will he work?” posed S.D. Saxena, who recently retired as Director (Finance), BSNL.

Bharat Sanchar Nigam Ltd’s slogan, “Connecting India” seems to have gone woefully off tune. As the government-owned company’s profits nosedived to a new low and the firm caved in to aggressive private competitors, it is sending desperate SOS signals.

The third largest employer after the Indian Army and the Indian Railways, BSNL recorded a staggering 80 per cent drop in its net profit in 2008-09 to Rs 575 crore from Rs 3,009 crore in 2007-08. Its revenue at Rs 35,812 crore in 2008-09 was 10 per cent higher.

Even more alarming is the fact that BSNL is actually making losses in its telecom operations as the company earned an interest income of Rs 3,900 crore contributing to its profits. It may be astonishing to note but this is not a myth rather a fact that in the last Fiscal year BSNL’s interest income was Rs 4,004 crore, providing for its profit of Rs 3009 crore. This clearly shows the fall in operating income of the giant and an indication towards negative NVA and a loss of the shareholder’s wealth invested in the company.

Their reserve of Rs 35,337 crore was the saving grace. The financial mess plaguing the telecom giant was amply demonstrated by the statement of Gurudas Kamat, Minister of State for Telecom and Information Technology, in Parliament where he said BSNL’s revenue from basic services dipped by 20.65 per cent in 2008-09, recording a plunge to Rs 11,505 crore from Rs 14,499 crore in 2007-08.

The company has fared badly even in its stronghold of landline connections, where it holds 76 per cent of the total market. The number of consumers using BSNL connections has fallen in the last six months by 7.27 lakhs from 297.03 lakh in November 2008 to 289.76 lakh in May 2009.

In the last five years, BSNL’s revenues from landline connections has dipped by more than 45 per cent — from Rs 22,814 crore in 2004-05 to Rs 11,505 crore in 2008-09. Contrast this with the private sector player Bharti Airtel which tripled its net profit in the last four years to Rs 7,744 crore in 2008-09 on a turnover of Rs 37,000 crore.

[pic]
Source: BSNL’s official website.

In 2005-06, the Public Sector Undertaking reported revenues of Rs 36,138 crore from operations, which has reduced to Rs 30,268 crore in 2008-09. Profit from operations has slumped — from Rs 4,230 crore in 2005 to a net profit of Rs 574 crore in 2009. All indications are there that the company will slide into the red at the end of the current fiscal. It is also losing market share in the highly competitive market, which has as many as 12 operators.

While its traditional stronghold has fallen apart, the Public Sector Undertaking has failed to make a dent in the mobile sector, losing out to private service providers.
From second position in 2003 in the mobile phone segment, the company is now ranked fourth with rival companies Reliance and Vodafone overtaking it. Airtel, however, continues to hold the top position.

Before moving further let us go through what the company said last year in its Annual General Meeting – ‘Scaling new heights of success, the present turnover of BSNL is more than Rs.351,820 million (US $ 8 billion) with net profit to the tune of Rs.99,390 million (US $ 2.26 billion) for last financial year. The infrastructure asset on telephone alone is worth about Rs.630,000 million (US $ 14.37 billion). The company has also started 3G services in 290 cities and acquired more than 6 Lakh customers. It had planned to roll out 3G services in 760 cities across the country in 2010-11. The shift in demand from voice to data has revolutionized the very nature of the network. BSNL is poised to cash on this opportunity and has planned for extensive expansion of the Broadband services. The Broadband customer base of 3.56 Million customer in March'2009 is planned to be increased to 16.00 million by March 2014. Now bsnl is the unchallenged top among the top five telecom service provider company in India.’

It is true that the turnover, nationwide coverage, reach, comprehensive range of telecom services and the desire to excel had once made BSNL the No. 1 Telecom Company of India. But, lately BSNL moved in a wrong direction and turned into rags from riches. This can be further evidenced by the port mortem analysis of the company’s revenue over the years and its process of upgradation and buying new equipments as compared with the private players of the sector:

BSNL insiders are sure that its business interests are being sabotaged by private operators even as the PSU has become a playground for dishing out political favours.

The brakes on BSNL's mobile juggernaut were applied in 2006 when a vendor, disqualified from a tender to supply mobile equipment, went to court, alleging irregularities in the process. “It is said that the court case was in the interest of the competitors who wanted the delay to prolong so that BSNL goes out the burgeoning market place giving the other operators a free hand in the market. We found that in those days not a single lawyer worth the name was available to fight the case on behalf of BSNL as all the other operators had retained them to fight the case for the applicant who was delaying the finalisation of the tender,” says Saxena.

Thus, the statement made by Mr. S.D. Saxena on PSUs in India having zero flexibility and lack of freedom among their elected managing director and other board members is in tune with the downfall of the giant.But, there are several reasons leading towards an major event to happen and the case of BSNL is no different. Thus, many wrong decisions and events, following them, shook the roots of BSNL and took it to a place where it is now, a company which only incurs losses out of the high investment and capital deployed in it.

BSNL which is the forefront provider of telephony services in rural India, is gradually losing it's market share to leading private operators. The company started the PCO revolution in the country and took the mammoth task of providing telephony service in the rural India which was then a nonviable business for the private providers. Now with the wireline services taking a backseat and wireless flourishing, BSNL's wireless service's growth has been declining despite its very low tariffs. This is evident from the fact that in December 2009, BSNL had 22.4 million rural subscribers, as compared to 20.9 million in September 2009 which was only a 7 percent growth, whereas, Airtel had 43.2 million subscribers in December 2009, as compared to 38.5 million in September that year, scoring a 13 percent growth. Vodafone also registered an 11 percent growth in the same period.

The process of selecting a Chairman & Managing Directors (CMD) of BSNL and MTNL is still on. The new search-cum-selection panel scrapped the earlier list and invited applications for the posts. The old committee had come under controversy as BSNL employees Union challenged the process and selection made by old search panel in the Delhi High Court. The government then formed a new panel with Sam Pitroda as the lead and included UIDAI Chairman Nandan Nilekani, T K Nair, Principal Secretary to Prime Minister and Cabinet Secretary K M Chandrashekhar in the panel.

Is it why we make such a huge investment? Is it why we staff the best talent of the country in a corporate house? Ony to incur losses? That’s it?
The answer offcourse is “No”
Then why has BSNL’s investments falen into the trap?
The answer is what we are gong to try to find out in by this study.

7. The ANSWER With ANALYSIS :

During the financial year 2008-2009 (from April 1, 2008 to March 31, 2009) BSNL had added 8.1 million new customers in various telephone services taking its customer base to 75.9 million. BSNL's nearest competitor Bharti Airtel was standing at a customer base of 62.3 million. However, despite impressive growth shown by BSNL in those times, the Fixed line customer base of BSNL went on declining.

In order to woo back its fixed-line customers BSNL had brought down long distance calling rate under OneIndia plan, however, the success of the scheme was not known. Hence, BSNL faced bleak fiscal 2009-2010 as users flee.There was an intense competition in Indian Telecom sector and various Telcos went on rolling out attractive schemes and were providing good customer services.

Since 2005, the public sector unit has been able to buy mobile telephony gear for supporting just about 20 million subscribers due to controversies surrounding the tendering process. Private players, on the other hand, have signed multiple deals during the same period which has enabled them to triple their subscriber base in the last five years. BSNL floated a tender for 63 million lines in 2006 but was delayed after Motorola went to court. This tender was finally reduced to a mere 13 million lines at the behest of the then Communications and IT Minister, A Raja.

Though BSNL tried to compensate by floating another tender to buy equipment for supporting 93 million subscribers in 2007, the contract is yet to be signed owing to a messed-up process. This time Nokia Siemens has gone to court after BSNL disqualified its offer, leaving only Ericsson and Chinese manufacturer Huawei in the fray.

The matter has got further complicated with the Home Ministry raising concerns over giving the contract to the Chinese vendor, the Central Vigilance Commission has started an enquiry into the entire process. Had BSNL gone ahead with these two projects, it would have been at the top.

Also, one of the major reasons for BSNL’s poor profit in 2008-09 was a sharp increase meeting enhanced salary commitments due to implementation of the Sixth Pay Commission. Yet another reason was high depreciation charges of Rs 8,500 crore in 2008-09 and Rs 9,696 crore in 2007-08. BSNL has claimed that its earnings before interest, depreciation, taxes and amortisation (EBIDTA), was positive at Rs 7,000 crore.

Intense competition following the opening up of the telecom sector to mobile operators, is another reason that has caused BSNL’s downfall. Lifetime schemes for mobile subscribers, sharp fall in average revenue per subscribers, steep increase in operating expenses and higher customer acquisition cost are factors eating up its profits.

One representative example of intense competition is the Karnataka telecom circle where there are now 10 mobile and four landline operators.The circle leader is Bharti Airtel with 10.55 million mobile subscribers at the end of June 2009 and BSNL is a distant third with 2.54 millon subscribers.

After reporting losses at the end of last fiscal, Bharat Sanchar Nigam Ltd had gone cash negative further plunging the telecom company into deep financial mess. BSNL has now decided to borrow Rs 3,000 crore to meet routine expenses including salary payments for the current financial year and another Rs 11,000 crore for the fiscal 2011-12.
This comes even as the PSU has asked the Government for a bailout package including full refund of the money paid for 3G and broadband spectrum and financial support for rolling out broadband services in rural areas.
BSNL has been struggling over the past two years owing to delays in buying network equipment, political interference and a messed up roll out of 3G and broadband services despite getting spectrum one year ahead of the other players.
BSNL's employees union has blamed top officers leading the PSU for the mess and has repeatedly requested the Prime Minister, Dr Manmohan Singh, for intervention.

“This company cannot survive under such servile management, which, we are sure, cannot rise above the interests of the lords. Thus, the issue fundamentally boils down to induction of the rarest of rare talent on the board, definitely not through the orthodox and primitive mechanism that Public Enterprise Selection Board has in place at the moment. The criterion cannot be just Indian Telecom Services seniority, based on redundant performance mechanism which cannot be the parameters to decide top slots to run a gigantic company virtually in shambles today,” the Sanchar Nigam Executive Association had said a letter to the Prime Minister.

Government apathy also played an important role for the downfall of the giant, while competitors were expanding and growing fast, BSNL was strangled by the non-availability of capacity.

Knowing fully well that the explosive growth in mobile telephony was calling for a rapid expansion of telecom network, former IT and Telecom minister Dayanidhi Maran had floated a tender for 45 million GSM mobile lines three years ago. Unfortunately for BSNL, soon after the finalisation of the order, Maran was replaced by A Raja who scraped the order on grounds of higher price per line.

Though BSNL under Raja made another tender offer and shortlisted two vendors for new lines, the whole process was stuck again because one of the rejected vendors took BSNL to court questioning its rejection on technical grounds. As BSNL’s expansion plans are bogged down with litigations, many new private players were allowed by the government to enter the mobile market creating more competition for the PSU. While private companies are on an expansion spree adding 10 to 15 lakh new subscribers every month, BSNL could only provide connection to five lakh new customers a month due to shortage of mobilephone lines.

The journey to mobile number portability in India has hit its first major hurdle. Established players have demanded a “porting charge” be set up so they can recover their expenses in upgrading their networks to enable mobile number portability. BSNL estimates that the costs for the system upgrade to its network would amount to an initial expenditure of Rs. 1,065 cores in addition to an annual operational expenditure of about Rs 184.75 crores for the purpose of MNP service.
Interestingly, BSNL viewed MNP as elitist initially and said that it is meant to enable a few customers who want to save the cost of informing friends, business partners about a change of number, and save on costs of updating company web pages, brochures and business cards. BSNL had questioned the Government’s plan of giving the two MNP operators exclusivity for five years, and the TRAI for not sharing detailed cost sheet of MNP service providers. It suggests that only those who opt for MNP must pay.
Mr Siddharth Behura, Secretary, Department of Telecom had said that Mobile Number Portability (MNP) may be introduced only by the end of the year of the year 2010. MNP allows subscribers to change their operator without having to give up their mobile numbers, this MNP has added to the miseries of BSNL as its loyal subscribers, who were just being loyal for the sake of retaining their numbers, would now part ways with the company. And not a surprise, the same happened. DoT had earlier said number portability would be introduced by September. However, regulatory issues, including tariffs and port charges, were yet to be decided by the telecom regulator.
While the two companies which have been given the licence to set up MNP in India — Syniverse and Telcordia — have told the telecom regulator that they would like to charge about Rs 200 for each subscriber porting, TRAI has pegged it at Rs 100.
But, adding to its woes, the recently introduced Mobile Number Portability (MNP) has hit hard at BSNL and MTNL. BSNL's subscriber base declined by 131,581 customers while MTNL lost nearly 5,869 customers after MNP was introduced. In an effort to arrest the erosion in their user base, both the companies, MTNL and BSNL have come up with measures to address customer grievances and improve service quality apart from additional incentives to distributors and retailers.

Lack of concentration or the unbearable slowness on addressing customer grievances have also led to the loss of customer base in urban areas. While the private players give upmost importance to satisfaction, a response from the BSNL customer cell would take days to reach the customers. This has forced many users to opt for private providers.

BSNL was also a victim of unfulfilled Promises, the company had floated tender for rolling out WiMax services on a franchise basis. The WiMax services have already been launched in 1,000 blocks and this will be extended to 5,000 blocks soon. But it was forced to defer its launch as five of the bidders turned out to be fake. The needle of suspicion points towards a top boss in the ministry.

“These are incidents, which reflect that there is a systematic attempt to sabotage the company,” says V A N Namboodiri, Convenor, Joint Forum of BSNL Associations. When the telecom sector was opened to private operators, the Centre had promised that the license fee collected from subscribers would be ploughed back to the company. But Namboodiri alleged that an amount of Rs 3,000 crore was never transferred to BSNL.

But the question that arises here that what are these external factors that’s affecting BSNL, is it because of the company’s internal weaknesses. A SWOT analysis has to be done to find out the answer to the question.
Coming to the employees to the company, there is no dearth of talent in its employees, though they are a demoralised lot in the recent days but the fact that BSNL officers are a talented lot cannot be withheld.“Most of the private operator's networks have been rolled out by retired BSNL officers. So if you give them a free hand to run the operations these officers can perform better than any executive in a private company. Even now, if things change, BSNL can compete,” says Dr Seth, a reknowned scholar.
The company also suffered loss of another Rs 3,000 crore as the Access Deficit Charge (ADC) collected by the Department of Telecom from private telecom operators for giving connection to less attractive rural areas, was not channeled back to the company as promised by the Government. Access Deficit Charges (ADC, a levy being paid by the private operators to BSNL for providing service in non-lucrative areas especially rural areas) was been slashed by 20% by TRAI, w.e.f. April 1, 2009. The reduction in ADC hit the bottomlines of BSNL

The union leader had also claimed that BSNL suffered financially as it was mandated by the government to set up mobile network in rural areas where revenue per user is very low but capital expenditure is more.

The private players, on the other hand, concentrated much more on large cities where revenue generation and profits are higher. As a result, Bharti Airtel today is the undisputed leader in the mobile market with a country wide subscriber base of 102 million at the end of June 2009. BSNL was a distant third with 49 million subscribers.
Another former Chairman of BSNL under whom the PSU was growing rapidly says the blame also lies with the top management for slow decision making. “There are lots of discussions and debates but the final decision is taken after much delay. For example, the move to share towers should have been done three years ago. I don't see the push that is required from the top management. The more you delay decisions, the more will be the interference from every quarter. The management of such a large company should be bold and take quick decisions. They should not accept whatever comes from the top,” says the former BSNL honcho on conditions of anonymity. These factors combined with problems of red-tapism and trade unions, and uncertainties such as disinvestment and (initial public offering) IPO plans, have further added to its worries.

8. PLANS FOR REVIVAL OF THE COMPANY

8.1 MERGER PLAN

There is a proposal to merge BSNL with Mahanagar Telephone Nigam Ltd (MTNL) which operates in Delhi and Mumbai. “As MTNL is providing services only in Delhi and Mumbai, its scope of expansion has reached saturation. If the two companies merged, it would create the country’s largest telecom company,” said former BSNL Chairman and Managing Director Goyal.

A consortium of consultants led by ICICI Securities was appointed by the government to advice and aid in restructuring MTNL and BSNL for achieving higher synergies in their operations.

On February 23, 2011, The Department of Telecommunications (DoT) said it wanted to revive a proposal for the merger of state-owned operators BSNL and MTNL. In its draft plan, the department while showing concern over the deteriorating performance of BSNL and MTNL said that BSNL and MTNL should be merged as they have complimentary operations and can combine their strengths for synergies. DoT said the government should set up a multi-stakeholder committee to develop a restructuring plan for both firms. The committee should have members from public enterprises, the DoT, department of IT and ministry of finance. The telecommunication operators should focus on enterprise business, services to government and the public sector, value-added services and technologies like 3G, the department recommends
The merger talks between Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd came back on the menu. The two PSUs discussed the issue at a meeting with the Prime Minister as part of a plan to revive the company's profitability.
The two telecom companies have been exploring possibility of a merger for the past two years, but issues related to management, employee compensation and holding structure had put the deal on a backburner.
But now with both BSNL and MTNL losing their market share to private players, there is pressure on them to perform. While BSNL does not have access to most lucrative markets of Delhi and Mumbai, MTNL does not have presence in other parts of the country. Synergising their operations could put them in a better position to take on the intense competition in the mobile segment.

8.2 DIVESTMENT

Telecom Minister A Raja, who recently reviewed the performance of the company, asked it to overhaul by listing out its priority to turnaround. First, push for an IPO as it would bring in money for improving its services to face competition from private players. The Minister has already asked the BSNL management to talk to labour unions on this issue.

The Union Ministry of Communications and IT has left it to the Finance Ministry to decide the appropriate time for divesting 10 per cent equity in Bharat Sanchar Nigam Ltd.
Delivering the keynote address at the fifth Assocham Global Telecom Summit here, Mr. Siddharth Behura, Secretary, Department of Telecom, said, “As far as the issue of BSNL disinvestment is concerned, the ball is in the court of the Finance Ministry which will decide the time and issue price as the necessary consultations between the Ministry of Communications & IT and the Finance Ministry have been concluded and it is left to the latter to launch BSNL disinvestment at a conducive time.”
However, the BSNL employees union has strongly opposed divestment on the grounds that it will not benefit the company in any way. BSNL’s profits dipped drastically last year to just over Rs 100 crore from over Rs 3,000 crore in 2007-08.
But Rajya Sabha member and the former promoter of BPL Mobiles Rajiv Chandrashekar feels that “The BSNL board must include outside technology and marketing experts to guide its management team. Its organisational structure should be simplified to allow faster decision making.” Clearly, there is an attempt to make the elephant dance again. But the question that remains is: are the efforts sincere and strong enough to make BSNL profitable and a market leader again?

In a bid to address the problems, the Prime Minister recently held a meeting with top functionaries of the Communications Ministry and BSNL, to discuss a whole host of issues, including the proposed IPO and possible merger with MTNL. “With oversight by the Prime Minister, I am confident the necessary steps will be taken to facilitate a turnaround in BSNL's fortunes, ” says Rajeev Chandrasekhar, Member of Parliament, who had written to the PM suggesting ways to turn around the PSU. Mr.Chandrasekhar's suggestions include changing the management structure of BSNL and appointing a Chief Operating Officer through an international hunt. Three lakhs employees and 80 million customers across the country would be hoping that BSNL does not sink and lives to fight another day.

8.2.1 Employees Strike Folowing the Divestment Plan

As mentioned earlier in the objectives towards the project, I have made a detailed study as of the employee strike in the company against the divestment plan which has shook the roots of the company. A picture which was demonstrated during the strikes by the employees is shown below.

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Source : BSNL’ s Officail Website

As shown clearly in the picture the demands and the factors on which the strike was called. The employees have shown a great resistance in the divestment process of BSNL.
In a bid to get BSNL to work more efficiently, the Government was also looking to get the company listed on the stock exchanges. Though the Government had given its nod for the Initial Public Offering (IPO) over a year back, the employees union are against the proposal. The BSNL management has been asked to negotiate with the employees union and move ahead on the plan.
The employees union of Bharat Sanchar Nigma Ltd said that the Government’s proposal to list profitable PSUs was totally against the interest of the companies and the workers. BSNL is one of the PSUs mentioned in the list for disinvestment.
BSNL Employees’ Union expressed its protest against the move and said “We have been assured by the Government earlier that BSNL will not be disinvested and in case of any such proposal it will be discussed with the unions. The unilateral decision of the Government is in violation of the agreement.”
“The immediate task for BSNL is not listing but making it financially viable and more service-oriented. The cutting of 45.5 million lines tender into half by the authorities has already resulted in (a) huge loss of market share of the company, dipping it to the 2nd position in total connections and 4th position in mobile lines,” it added.
The employees union also said the company should not cancel the existing tender of 95 million lines. “The company is starving of mobile lines and instead of issuing purchase order for the present tender if the management goes for another tender, it will take a further delay of two years and the result will be an utter disaster,” the union said.
Despite 3G licences having been given to the company, during the last one year, only about 80,000 connections could be provided despite a target of 1,50,000. Broadband connections are delayed due to shortage of modems.
“Listing will not solve any problem, except garnering funds for government. The privatisation of Videsh Sanchar Nigam Ltd and the more-than-45 per cent disinvestment of Mahanagar Telephone Nigam Ltd clearly indicate that this proposed listing is only but the first step towards privatisation,” said a statement.

Thus, the union finally decided to call a strike which was reported as Bharat Sanchar Nigam Ltd staff was to go on a three-day strike from October 19 to protest against the Government's plans to divest stake in the company. The employees unions also had sought refund of the money paid by the PSU for getting the 3G and wireless broadband spectrum.
The decision to go on a strike was taken at the National Convention of BSNL Workers . The union was also demanding procurement of mobile network equipment and also protesting against retrenchment of 1 lakh workers which was recommended by the Sam Pitroda Committee. It also demanded the Government to restore licence fee reimbursement, payment of ADC etc to restore the financial viability of BSNL.
“The convention also called upon the workers to dedicatedly perform, so that better service could be provided to the customers. The injustice done to the BSNL pensioners should be undone by ordering pension revision for pre 2007 BSNL retirees. The convention also demanded early settlement of ITS absorption issue and grant of 78.2 per cent IDA,” said a press release. More than 1,500 delegates participated in the convention.
They had earlier written to the Prime Minister seeking his intervention in the functioning of the company.

8.3 Some other steps on how the company can be revived are: • A major overhaul in branding, marketing and distribution network is required. For this task, Boston Consulting Group’s report for restructuring the company is under consideration. A market research company, IMRB, has also been hired by the company to study and offer solutions to check plummeting landline subscriptions.

• Also, the number of subscribers has to be increased by increasing mobile lines. The tender process for purchasing equipment should be transparent to ensure it is not embroiled in any litigation.

The company has also announced a list of measures to retain landline connections. The measures are as follows: To offer broadband services bundled with landline, introduce value added services like Voice over IP (VOIP), Games on Demand, IPTV, SMS etc for promoting land line services. The other initiatives include introducing alternate tariff plans & improving customer service.

On the other hand one issue the PSU is struggling to work with is to bring the employees union on the same page as the management. While BSNL management wants to get the company listed on the stock exchanges to bring in more accountability and efficiency, the union is dead against the move.

’The fact is not that BSNL is not being beaten in the market. If that was the case we would have reconciled to it being the product of market forces. But BSNL's downfall is being caused through external factors,' says a BSNL officer.

9. FUTURE PROSPECTS OF THE COMPANY.

Former BSNL Chairman and Managing Director Kuldeep Goyal was upbeat about the future of the company and confident of making a turnaround. “We will add 100 million subscribers and double the turnover in the next three to five years. This should be done through management restructuring exercise, expansion of mobile and broadband networks,” he said.

In addition, there are several plans in the pipeline, including sharing of towers and optical fibre backbone with competitors, venturing into new businesses like managed networks and providing IT services like security (firewalls) and managed network services to other companies.

The government also has plans to sell 10 per cent of BSNL’s stake to raise Rs 10,000 crore for its mega GSM plan. But given the opposition from workers’ union and the company poor financial performance, an equity sale is unlikely to happen in the near future.

“The Government is keen to list BSNL, but the deadline is yet to be decided,” Telecom Secretary Siddharth Behuria said in a recent press meet. But Namboodiri feels that selling shares to raise money is unwarranted as BSNL has a reserve of Rs 35,337 crore.

Financial management of the company is also under the scanner as it is yet to recover Rs 3,092 crore of dues from its customers, including government departments. The Comptroller and Auditor General (CAG) had also pulled up the company for not returning government loan of Rs 7,500 crore despite having a cash-reserve of Rs 18,829 crore as on March 2005 leading to an excess expenditure of Rs 1,089 crore on interest payment during the year 2005-2007.

10. REPORT BY JP MORGAN

JP Morgan Sees Clouds Over BSNL’s Fixed-line Future

Bharat Sanchar Nigam Ltd (BSNL) is expected to be a winner in the wireless space, but in fixed-line services it may not be able to cope with the pressures of falling long-distance revenues and its huge cost base.
This outlook for BSNL is part of a recent report by JP Morgan’s Asia Pacific equity research wing.
The report on the Indian telecom sector questions BSNL’s long-term business viability if its fixed-line business suffers even as wireless grows.
“We would count Bharti, Tata Tele and Reliance Infocomm as the likely players who will emerge victorious,” said the JP Morgan analysts in the report.
According to JP Morgan, BSNL’s problem areas are falling revenues from national and international long distance (NLD/ILD) services, financial resources that it needs to expand, a huge cost base with 3,60,000 employees, political interference and falling growth rate in the fixed business.
“However, BSNL has been able to make up for the decline in its fixed line business through a rapid growth in its wireless business.. its services (global system for mobile communications-based cellular) have been extremely successful and the company has gained a 20.8 per cent share of the wireless market in a short span of seven months,” the report says.
The report says that BSNL’s phenomenal success in the wireless business could now get tempered by deeper rollouts by its competitors with the convergence of tariffs.
BSNL fixed-line service had a subscriber base of around 35.4 million subscribers on March 31, 2003, and contributes around 80 per cent of its total business. BSNL enjoys a market share of around 85 per cent in the fixed service business.
According to industry estimates, BSNL’s basic service business (fixed plus WLL-M) accounted for around Rs. 21,570 crore revenues against total revenues of Rs. 27,500 crore for 2002-03, or a growth of two per cent over FY02.
How can BSNL accelerate its fixed line growth?
According to JP Morgan, BSNL could be saved by the Universal Service Obligations (USO) specified by the Union government. The USO calls upon all basic telephony operators to roll out services in rural areas. “It is possible that the allocations from universal obligations will help it continue to float. In that case, BSNL could continue to remain a formidable competitor even going forward,” it said.
Top BSNL officials believe that it has a strong presence in the fixed line business and with the operator gearing up to become an international carrier, there is little to worry about. Officials think that, like any new technology, wireless growth last year surpassed the fixed line growth. But BSNL with its wireless and wireline presence is in a perfect position to offer voice, data and video solutions to its subscribers across rural and urban India.
Source: The Financial Express

11. FINDINGS

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When Mr. Kuldeep Goyal took charge as Chairman and Managing Director of BSNL in 2007 everyone expected him to do wonders for the PSU. After all, during his short tenure of ten months as Executive Director, MTNL Mumbai, he was able to double the connections in GSM network of MTNL Mumbai and enhance its market share from 8.93 per cent to 15.5 per cent.
Answers to some Questions that I found through the Analysis.
Why it is that BSNL's performance has fallen over the past two-three years when all the private players have reported exponential growth during the same period?
It is unfair to compare BSNL with private players as it is not an apple-to-apple comparison. BSNL started out as a fixed-line operator and a significant part of the revenue was coming from fixed line. None of the private players was ever into fixed line seriously. So the decline in BSNL’s revenues is primarily due to a decrease in the fixed line telephony as subscribers prefer to take a mobile connection. The second difference is that BSNL has social obligations and had gone to the hinterlands of the country much ahead of any private players. As a national operator BSNL’s mandate was not profit-making when it rolled out services to the difficult areas. The third difference is that BSNL has over 3 lakh employees to take care of, which means paying salaries and pension. A private operator may only have 25,000 employees to run its business. So the company expenditure on wages, pensions is high and this has only increased with the revised Pay Commission.
But BSNL has also lost out in the mobile segment. After coming so close to being the number one operator in the country now the company is at number four slot. The reason, I think is not that it has done badly in the mobile segment. It has been adding close to a million subscribers every month and had got 2 million new users in a single month.

I agree that the delay in buying equipment has had an impact on its business. But that is the existing system and we have to work within the framework laid out by the Government.
But procurement of equipment is not the only reason. The managerial persons are also not getting Government support like they used to some years ago. Access Deficit Charge has been removed, support from the Universal Services Obligation fund has been reduced, and various other charges have been imposed. So if anyone is comparing BSNL's performance against that with a few years ago, then these things have to be taken into account.
What is the status of the 93-million-line GSM tender?
The Central Vigilance Commission is investigating some allegations pertaining to the tender. The findings of the CVC are awaited and then it will take a call on this.
How about the employees resistance on BSNL's IPO?
I am very sure that once the Government gives its nod for the IPO, BSNL will move ahead on that. It will be interesting to note that already various employees associations, such as the officer's union, have given support to the proposal. Majority of the employees are in favour of IPO. Only a formal decision in this regard is awaited.
How is BSNL not going the AIRINDIA way?
I do not agree that BSNL is going the Air India way. BSNL is a profit making company though it has been incurring some operting losses during past years but the internal management of the company is taking a number of steps to change the way they function.
They are restructuring themselves to a corporate structure with separate business segments. They also have a new business segment for tower sharing which can become a revenue earner for them. I am sure that starting next year, BSNL will see good growth.

But on the other side there are some opinions erupting out of the study relating to Slow response, inefficiency in service and acting on grievances etc has made BSNL like any other public sector undertaking. Like any organization governed by the state, BSNL is also following the slogan "get paid for inefficiency"

Phone services, railways, airways, hospital amenities are emergency services which should be up to date for the public. Corruption and big frauds sucking up large public funds is the new trend.

BSNL is a very interesting case study in Indian Business scenario. Firstly, the division of department of Posts & Telegraph (P&T) got transformed into DOT and then DOT being abruptly transformed into public company. But, there was no change in market scenario (DOT enjoyed a pure monopoly) and the only change felt was internal- that of an organizational restructuring. However when BSNL was born the market had transformed into a competitive one with many a player. It was also a period of transition of Communication technology with wireless GSM and CDMA making its presence felt and every private player waiting to pounce and grab a lion’s share of such a promising market. When others had bolted off the starting line, BSNL had just started to take its first tottering steps of infancy. The assets it had- a pan-India scope of operation, a huge employee base, large investments in land-line infrastructure, a very rigid hierarchical and bureaucratic setup- proved to be its nemesis.

For a company’s growth in this new era it essentially requires 6 things: 1) Cutting edge technology. 2) Skilled but limited personnel equipped with proper IT tools 3)Quality control & Customer Care 4) Service Level Collaboration, Outsourcing etc to gain competitive edge for partners 5)Marketing 6)Organizational Setup that promotes team work and flexible project/process based work culture.

BSNL today we find lacks in almost all aspects in its day to day operation but interestingly it possess or can possess with some effort all of the above. All it needs is change- People, Process and Product. Then I am sure the Profitability also will change. The consumers will get better service and we will be proud to be associated with brand BSNL.

BSNL has good infrastructure and young efficient technical workforce but there are some problems at management level (all level) like-ITS officers still the officers of DoT and they are neither leaving nor absorbing the BSNL. Owing to this mismanagement senior officers of BSNL are getting benefit and looting the company in many ways like huge uncontrolled unnecessary expenses in vehicles, giving fake maintenance contract to related parties, unplanned investment policy, old pattern of work, and no proper promotion policy for the young educated engineers.

12. CONCLUSIONS AND SUGGESTIONS

The entire project states near us the great history of the company followed by the various stages it passed through in different phases of the timeline. Also, the fall of the Indian giant which is no more a myth but a hard and hurting fact that every Indian is surprised to see.

BSNL had engaged the service of The Boston Consulting Group (BCG) to help develop an overall strategy and transformation plan for the organization. According to BCG's revival plan, the telecom operator has decided to focus on four key operations such as consumer mobility, broadband, enterprise business and new business which includes infrastructure sharing.

Apart from the above aspects, BSNL also has to find ways to change its typical style of operation as a state-run organization, slow in processing customer request and implementation of policies, inefficiency, high level of bureaucracy, and the heavy unionism. It has to find ways to retain its number one position in the market and the trust of its customers by providing prompt, efficient, and courteous service. The firm also should identify the product changes needed to give it a competitive edge in the market with quality products and services at fair and reasonable rates. It should establish an efficient business processes enabled by strong IT backup. The company should create a team of excellent capacity to lead the marketing, sales and distribution of its products. It should also work on more interesting and result oriented promotional activities to expand its mobile network and rural reach. Appropriate career planning and training should be given to its employees and should readdress their grievances to create a conducive work environment with strong focus on performance.

13. BIBLIOGRAPHY

• INDIA TODAY MAGAZINE

• ANNUAL REPORT AND DIRECTORS REPORT OF B.S.N.L. FOR 2009-2010

• THE ECONOMIC TIMES

• THE BUSINESS LINE

• THE HINDU

• THE TIMES OF INDIA

• BSNL’S OFFICIAL WEBSITE

• VARIOUS OTHER INTENET SITES

• ICAI AND ICSI PERIODICALS,

14. ABBREVIATIONS

• BSNL- Bharat Sanchar Nigam Limited • PSU- Public Sector Undertaking • IPO- Initial Public Offering • GSM- Global Systems for Mobile • MTNL- , • CSP- Communication Service Provider • CDMA- Code Divison Multiple Access • WLL- Wireless local Loop • MPLS- Manual Level Position sensor • VPN- Virtual Public Network • VSAT- Very Small Aperture Terminal • VOIP – Voice Over Internet Protocol • IN SERVICES –Intelligence Network Services.

Next page annual report

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Government-owned telecom firm Bharat Sanchar Nigam Ltd (BSNL) seems to have become the first casuality of the heavy competition and rising consumer expectations in India's telecom. It's net profit fell by 97% year-on-year in 2008-09, and on present trends it will soon be in the red

BSNL's profit after tax plummeted to just Rs.1.04 billion (Rs 104 crores) in 2008-09 from Rs 3009 crores in 2007-08 and a whopping Rs11806 crores the year earlier.

Since 2006, while its mobile subscribers grew by 70%, mobile revenues showed just 11% growth. Fixed line revenues fared far worse. In the last five years, BSNL's revenues halved from Rs 22,814 crore in 2004-05 to Rs 11,505 crore in 2008-09.

BSNL's sharp reversal of fortunes has raised concern in Government circles, since it's a top-ranking government employer and contributes between Rs 24,000 to Rs 30,000 crores every year in taxes and levies.

BSNL officials attribute the fall to lifetime tariff schemes, millions of sleeping customers, sharp increase in operating expenses and the huge impact of the Sixth Pay Commission. CMD Kuldeep Goyal hopes to improve matters through a management restructuring exercise, expansion of mobile and broadband networks and focus on sales, marketing, IT and customer care for customer acquisition. He says this will help BSNL add 100 million subscribers and double turnover in the next three to five years.

BSNL may have to do more than just restructuring to survive. Experts feel it should accelerate the move to disinvest part of Government holdings by raising money in the capital market. Its tendering process has sparked considerable litigation and delays; this problem definitely needs fixing, and fast.

A way should be found to reduce its disproportionate burden raising rural connectivity. And BSNL needs a major revamp in branding, marketing and distribution, and reorientation of the workforce.

Based on story in Times of India

WHAT THE MEDIA HAS TO SAY?

BSNL in red for first time

New Delhi, July 31 2009
Bharat Sanchar Nigam Ltd has posted its first-ever loss of Rs 1,822.65 crore for fiscal 2009-10 due to stiff competition from private players, delays in procuring equipment and drastic reduction in tariffs.
This is the first time that the telecom PSU has reported losses since it was formed.
Wage costs
The PSU blamed its performance on fall in fixed wire line connections with subscribers opting for mobile and increased outgo due to wage revision.
“The loss has occurred due to reduction in revenue, increase in expenditure and so on,” said a press statement.
BSNL has earned revenues of Rs 32,045.41 crore in 2009-10, which is 10.4 per cent lower than the previous financial year.
“The current year expenditure has been increased on account of wage revision of the employees with effect from 2007 as well as amortisation of one-time spectrum fee for 3G and BWA service. The wage revision has caused an additional expenditure of Rs 2,900 crore over the previous year on account of payment of arrears for the period from January 1, 2007 to March 31, 2010. Had the wage revision expenditure not been there, the company would have recorded a Profit Before Tax of Rs 703 crore,” BSNL said.

BASED ON A STORY IN BUSINES LINE

Delay in gear tender: BSNL losing ‘revenues of Rs 1,000 cr'
|15,000 leased circuit applications from enterprise customers are pending. |

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Over the past five years, all the tenders floated for buying mobile equipment have been delayed or cancelled due to alleged irregularities in the process.
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New Delhi, Nov. 26
Bharat Sanchar Nigam Ltd is losing out in the enterprise communication segment because of delays in procuring equipment for providing leased line services. A tender floated in August 2009 for buying equipment for managed leased line network (MLLN) is yet to be finalised.
According to one of the employees union, BSNL may be losing out on potential revenue of Rs 1,000 crore annually due to the delays.
“Tender for procurement of MLLN equipment having huge potential of bolstering the sapping growth of BSNL is not able to see the light of the day for more than a year because of a thoroughly indecisive and incompetent management having absolutely no concern and commitment to address vital business decisions of the company which is profusely bleeding,” said Mr G.L. Jogi, General Secretary, Sanchar Nigam Executive Association (SNEA). Owing to lack of equipment, roughly 15,000 leased circuit applications from enterprise customers are pending in various circles. This comes at a time when private operators including Airtel, Reliance Communications and BT are ramping up their enterprise communication segment.
BSNL had issued a tender for buying an equipment that is manufactured by only a few vendors. Only one vendor — ITI with OEM Tellabs — qualified in the technical evaluation. ITI with Tellabs quoted a price of about Rs 750 crore for the project.
BASED ON A STORY IN THE BUSINESS LINE

WHAT THE MEDIA HAS TO SAY?

WHAT THE MEDIA HAS TO SAY?
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WHAT THE MEDIA HAS TO SAY?