A report in the Economic Times regarding the improvement of BSNL is reproduced below:
How state-run telco BSNL is turning the corner. The company, headed by Anupam Shrivastava, who took over in January 2015, has been given a task by the telecom minister Manoj Sinha who took over from Ravi Shankar Prasad in July 2016 in a ministry reshuffle, to increase market share and bring back the telecom PSU into profits.
State-owned service operator Bharat Sanchar Nigam Limited (BSNL) is aggressively trying to turn around telecom business, and in the course of last two years, has brought various strategies to core, apart from consumer mobile business which has seen a heightened competition after the foray of new player Reliance Jio Infocomm in September last year.
The company, headed by Anupam Shrivastava, who took over in January 2015, has been given a task by the telecom minister Manoj Sinha who took over from Ravi Shankar Prasad in July 2016 in a ministry reshuffle, to increase market share and bring back the telecom PSU into profits.
The telco, however, had a two-fold task in hand that includes maintaining the market share from erosion amidst stiff competition and falling tariffs, and turn profitable by devising strategies to make best use of its large-spread telecom infrastructure.
BSNL that offers pan India telephony services except in the lucrative markets of Delhi and Mumbai, had earnings before interest, taxes, depreciation and amortization (EBIDTA) of Rs 672 crore in 2014-15 and Rs 3854 crore in 2015-16.
By 2018-2019, BSNL will be back again in profits, Shrivastava said, and attributed growing data demand, infrastructure sharing and lesser salary outgo impact and declining debt to equity ratio as the main drivers for a road to profitability.
The state-owned telecom operator has Rs 3,200 crore of debt as of March 31, 2017 which is nearly 10% of its topline. The company, according to the top executive is aggressively aiming to bring it down to zero in next two years with a slew of measures.
In the wake of increasing competition and consumers’ growing tilt towards data, state-driven telco had not much options but to match its voice and data offerings to that of private sector rivals to safeguard its market share.
With its consumer base largely spread in tier-II or semi-urban areas and rural regions, a tariff to suit cost-sensitive subscriber base has always been one of the top priorities for the governmnent-driven operator. The data rates of all service providers fell sharply making voice calls virtually zero or for a fixed payment as soon as new comer Reliance Jio Infocomm made its way into the Indian telecom landscape.
Anticipating the consumer drift towards new entrant Jio, offering unlimited voice and data via its all IP-based network, BSNL has become the first telco to respond quickly and introduced competitive tariff that include Rs 249 a month scheme. The new plan BB 249 includes unlimited data usage with no FUP (fair usage policy) limit with free voice calls for six months. In June, the telco has also launched ‘BSNL Chaukka 444‘ scheme, a prepaid pack that allows 4GB of data per day with a validity of 90 days.
Earlier, Shrivastava said that the telco was fully prepared to match tariff with what rivals including Jio had to offer, and added that it would continue to provide affordable mobile service plans to its consumer base. The tariff strategy, however, led BSNL to keep its subscriber base intact even at a time when private sector rivals saw a massive customer erosion from the disruptive foray of billionaire Mukesh Ambani-owned Jio.
“All our plans are made in such a way that customers would not leave our network. Our market share slightly improved last year,” BSNL chairman Shrivastava said.
Telecom network sharing is a new revenue stream for the state-run telco which had in 2015 embarked on a strategy to capitalize on idle infrastructure— be it active or passive— and has put intra-circle roaming (ICR), bandwidth, dark fibre, and mobile tower on the table.
The company said that ‘co-opetition’, which is a collaborative competition, would continue to be its important strategy in order to earn from its unused or underutilized resources.
However, a majority of revenue, according to it, is coming from tower sharing that has contributed close to Rs 1,000 crore in 2016-17.
BSNL’s collaboration strategy, initiated in 2015, generated about Rs 1,500 crore in additional revenue in 2016-17 through active and passive telecom infrastructure sharing with incumbent telecom service operators.
“We will continue to focus on collaborative approach and look to double the revenue to Rs 3,000 crore this year,” BSNL top executive said, adding that private sector players have evinced major interest in tower sharing.
As a part of business revival plan, the telco has also entered into 2G intra circle roaming pacts with Bharti Airtel, Vodafone India and Aircel while Mukesh Ambani-owned Reliance Jio Infocomm partnered BSNL for 2G and 4G services in September 2016.
The telco has shortlisted surplus land parcels which it believes could be used to garner additional capital by way of leasing them out. The company has already submitted a proposal to monetize eight properties particularly in Delhi and Mumbai that may fetch around Rs 2,000 crore.
However, the entire exercise is being done by KPMG which is telco’s consultant to evaluate 15,000 land parcels covering Ahmedabad, Jaipur, Lucknow, Pune, Chennai, Kolkata, Mumbai and Delhi, among others. The valuation is pegged at Rs 65,000 crore, which is a massive increase from a book value of Rs 975 crore, a decade ago.
The monetization plan itself has a potential to give a huge capital boost to the telecom PSU, however the company aims to use valuation as its net worth in books.
With the government releasing mobile virtual network operator (MVNO) guidelines in June 2016, BSNL is looking to tap this opportunity to put its under-utilized network to use specially in semi-urban and rural regions.
The telco has identified MVNO business as one of the key potential areas although the tariffs in the recent past have come down sharply making such as business bit unviable. MVNO business allows incumbent telcos to offer voice minutes and data bandwidth to retailers in bulk to further resell.
“We expect to get Rs 500 crore from the VNO business annually which will increase incrementally,” Shrivastava said, adding that MVNO gives an opportunity and the BSNL Board has already identified it as a good revenue driver.
The telco is focusing to strengthen its enterprise business and aims it to contribute at least 30% of the overall revenue. BSNL has over 20,000 business customers including large public sector firms such as the Reserve Bank of India and State Bank of India.
With a Wi-Fi initiative, telco plans to tap potential in places of historical, tourism and religious significance. The business model, however, is still in pipeline, BSNL plans to deploy a total of 1 lakh Wi-Fi hotspots by March 2019, a part of it would be operationalized through the Universal Service Obligation (USO) fund and revenue sharing venture.
Satellite phone business
The state-driven telecom major has recently forayed into a satellite-based voice and data services in collaboration with Inmarsat, a global satellite network, and plans to offer commercial services from 2018. BSNL has aggressive plans to provide satellite phone calls to private companies and persons, as well as offer in-flight communication (IFC) services via air carriers as well as make Internet and voice calls viable in ships, providing a new revenue stream altogether.
Shrivastava said that the telco has already received due approvals from the Ministry of Home Affairs (MHA) and the Department of Telecommunications (DoT), and added that BSNL has become a sole licensee to provide satellite-based services. Inmarsat has already installed its equipment at company’s premises after being tested for law enforcement purposes.
The state-run telecom has a mammoth outgo of close to 50% of its annual revenue towards meeting salary expenses of its staff. In 2015-16, the telecom company spent nearly Rs 15,000 crore in salary disbursements for an employee base of more than 200,000.
Private sector rivals including market-leader Bharti Airtel and India’s second-largest telco Vodafone India have 20,000 and 13,000 employees respectively, and they spend around 5% of their revenues on salaries. BSNL has now realized salary outgo, as a major force pulling it back although the VRS (voluntary retirement scheme) aimed to bring down headcount, is however, on hold considering a major spend is required to meet the plan.
Telco’s workforce, however, stands at 196,162 as on April 30, 2017. Backed by steady reduction in staff costs, it aims to achieve significant savings in next two years.
“Nearly 10% staff goes off the rolls every year as they achieve retirement. We are not filling up new positions and it could eventually help us in increasing operational profit,” the top executive added.
(courtesy:The Economic Times)