Why BSNL requires Rs. 35,000 crore?

The company can sustain on its own in FY2020-21, if DoT funds around Rs. 35,000 crore for activities such as vendor payment, capex costs, salary & pension and VRS

Bharat Sanchar Nigam Limited (BSNL) can sustain on its own in future if it get funds of around Rs. 35,000 crore from DoT (Department of Telecommunications). This fund will be utilised for activities such as vendor payment, capex requirements, salary & pension and VRS (Voluntary Retirement Scheme) which are critical for BSNL’s survival

Let’s look at the steps BSNL need to take so that it survives in the long run.

Vendor Payments: First and foremost, BSNL needs to gain the confidence of vendors by clearing their outstanding dues. Once the dues are cleared, vendors will be motivated to work with the company and meet future capex requirements of BSNL related to 3G, 4G and fixed broadband services. All this will help BSNL to increase its FY2018-19 revenue from Rs. 19,038 crore to a targeted revenue of around Rs. 25,000 crore in FY2019-20 through tower leasing and fiber leasing which will help in reducing its losses.

Capex Funding: BSNL is planning to launch 4G services in a big way and for this the company requires lot of capex. Even for expansion of its mobile services and fixed broadband services it requires capex. The total capex for the year is in the range of Rs. 5,000 crore. The capex funding in 4G services will help BSNL to launch 4G services pan-India thereby providing its loyal customers in semi urban and rural areas to stay with BSNL 4G services and not churn to Reliance Jio, Bharti Airtel and Vodafone Idea. With 4G, BSNL customers will also get high speed multimedia content on their smartphones which is limited in 3G services and this will increase its revenue.

BSNL’s Fund Requirements in FY2019-20:

Vendor Payment – Rs. 10,000 Cr

Capex Costs – Rs. 5,000 Cr

Salary + Pension – Rs. 10,000 Cr

VRS Scheme – Rs. 10,000 Cr

Source: Industry Sources, DigiAnalysys 

Salary & Pension: BSNL’s salary bill was around Rs. 14,488 crore in FY2018-19 and this is bound to decrease with each passing year due a large number of people retiring. The salary figure will also come down if the government comes out with attractive VRS (Voluntary Retirement Scheme) as main problem of BSNL is its workforce (around 1.65 lakh) which needs to be brought at par with industry in a phased manner.

BSNL’s Salary FY2016-19:

FY2016-17 – Rs. 15,715 Cr

FY2017-18 – Rs. 14,837 Cr

FY2018-19 – Rs. 14,488 Cr*

* stands for provisional

Source: BSNL

Voluntary Retirement Scheme (VRS): BSNL should offer VRS scheme to around 80,000 people who have completed 50 years of age. The person opting for VRS will have a deferred payment scheme – monthly amount and final retirement benefits. The person will get a fixed amount every month and once they reach 60 years they can claim final retirement benefits. BSNL’s sustainability is dependent on how successful they are with the VRS and so BSNL has no other alternative but to make VRS successful and attractive.

In terms of increasing BSNL’s revenue, the company needs to leverage tower and fiber. The company has around 78,000 towers registered with the new company BSNL Tower Corporation Limited (BTCL). BSNL needs to leverage towers in a big way as presently the company has leased only around 13,051 towers to private operators say Reliance Jio, Bharti Airtel, Vodafone Idea and Sify. The company also has around 800,000 RKm of fibres and the company needs to lease dark fiber or sell fiber to strategic investors so that it can get good amount of money which can be deployed for future technologies say 5G and IoT (Internet of Things).

BSNL need to focus on all these activities in H2 of 2019 so that the company can sustain of its own in 2020.

 

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