State owned telecom operator BSNL has reported (pdf, Hindi) total revenue of Rs 27,933.50 crore for the financial year 2011-2012 (FY-12), recording a 3.3% decline from Rs 28,876 crore revenue for the financial year 2010-2011 (FY-11). BSNL reported (pdf, Hindi) a total loss of Rs 8,851 crore for FY-12, a significant 38.64% increase from Rs 6,384 crore loss in FY-11. This announcement was made by Milind Deora, the Minister of State for Communications and Information Technology, in a written reply to the Rajya Sabha.
BSNL Profit/loss over the years
According to the minister, BSNL had been continuously recording a significant reduction in its profits since 2004-05 (FY-05), where it had posted a total profit of Rs 10,183 crore. In subsequent years, the company recorded profits of Rs 8,940 crore (FY-06), Rs 7,806 crore (FY-07), Rs 3,009 crore (FY-08), and Rs 575 crore (FY-09).
BSNL recorded its first loss in 2009-10 (FY-10) posting a total loss of 1,823 crore, which massively increased to Rs 6,384 crore, in FY-11, a 250% increase from the previous year loss. As a result, the accumulated profit has also decreased from Rs 29,165 crore in FY-09 to Rs 12,108 crore in FY-12.
MTNL Revenues: Along with BSNL Revenues, Deora stated that MTNL has reported a total loss of Rs 4,110 crore for the fiscal FY-11, a significant increase from Rs 2,802 crore in FY-10. We had reported this during the company’s Q4 results announced in May 2012.
Reasons for rising losses
The minister stated that the reasons for the rising losses are due to an increase in the company’s expenditure and a decline in its revenue.
- Decline in Revenue and ARPU: He said that the decline in revenue can be attributed to the stiff competition in the mobile sector, substitution of fixed connections with mobile connections; 3G and BWA spectrum charges and a decrease in the average revenue per user (ARPU) in the mobile sector. The minister however didn’t reveal any information on the current ARPU of BSNL.
- Increasing Expenditure: He attributed the increasing expenditure to the large legacy work force, whose salaries account for 50% of the revenues.
Steps Taken to Improve The Profitability
Deora noted that Department of Telecommunications (DoT) reviews the performance of BSNL periodically and has taken several steps to improve the profitability of BSNL. These include:
- Strengthening its stable revenue streams through a planned focus on Broadband, and next-generation network voice and enterprise businesses and a major focus on government projects.
- Strengthening its focus on the company’s customer care, service delivery, service assurance revenue management and asset management.
- Sharing non-electronic infrastructure like site sharing and antenna sharing at cell sites and monetization of real estate.
- Seeking deficit reimbursements for commercially unviable services.
- Reduce its work force by 1,00,000 employees by formulating a Voluntary Retirement Scheme (VRS) for its employees.
In addition, Deora noted that the recently released National telecom policy (NTP-2012) contemplated several roles for public service units which includes:
- Enhancing the government’s intervention capabilities in matters of national security or International importance like the execution of bilateral projects funded by the Indian government.
- Identify and exploit strategic and operational synergies in order to play a significant role in the provision of services, infrastructure creation, and manufacturing.
- To recognise and enhance the opportunities available for deployment of indigenously developed Telecom products, with Indian Intellectual property rights (IPR), and to provide vital support for domestic manufacturing of Indian Telecom products in the long run. Also, the organizations under DoT and DeitY (Department of Information Technology) should support each other to ensure they grow in the competitive telecom market and support the security needs of the country.