BSNL is still in the black, with accumulated profits of Rs 12,000 crore, but it has made losses in three successive years. Both organisations are overstaffed, with nearly 2,50,000 employees among them, whose salaries make up nearly 50% of their combined revenues.
In contrast, salaries are only 3-4% of revenues for their private sector rivals. Even when as companies made losses, BSNL and MTNL had to shell out Rs 20,000 crore and Rs 12,000 crore, respectively, for 3G and broadband spectrum.
With virtually no applications and little demand for these 3G services, the large payouts for this spectrumlook like a poor decision now. But over time, as 3G services spread, it could become a valuable resource. Both companies need to shed legacy staff.
A voluntary retirement scheme, which involves shedding 1,00,000 BSNL employees and around 20,000 people from MTNL's rolls, is likely to cost around Rs 20,000 crore. The government should pay this, because neither company can afford to do so now.
Despite the gloomy numbers, it should not be too hard to turn these companies around. Between them, they own 90% of all telecom landlines. This should be leveraged to carry data as well as voice, spreading the internet into parts of India where private players have little infrastructure in place.
They must become more focused on customers, pushing services and products, instead of waiting for someone to stumble on them by accident. Babus might make poor managers, especially in a consumer-driven industry like telecom, so both companies should look at hiring professionals from the industry.
The Indian government is itself a large customer of telecom and data services. These companies should integrate with the defence and security needs of the government and provide high-quality security and encryption services. Good management can turn both around.
