data | How BSNL blew up: The story behind the public telecom giant’s fall in the 6th chart

On July 27, the Union Cabinet approved a ₹1.64 lakh crore package to revive state-owned telecom firm, Bharat Sanchar Nigam Limited. While private companies are preparing to deploy 5G services, the government has allocated Rs 44,993 crore for administrative allocation of 4G spectrum. The revival package also includes funding for financially unviable rural wire line services where BSNL is the only dominant player.

The government expects that with the implementation of this recent package, BSNL will be operational and make profit by FY27. The last time the firm made profit was in 2008-09. In the last 13 years, telecom has suffered a loss of ₹1.02 trillion.

To achieve the target of making BSNL profitable in the next five years, expanding the declining customer base will be an important step. Currently, the subscriber base of Jio and Airtel is three times that of BSNL. Not only is the subscriber base falling, but BSNL’s revenue from each user is also a fraction of the revenue generated by the private service providers. The average revenue earned per user by BSNL is 2.5 times less than that of private companies.

One First bailout package announced in 2019 Helped reduce BSNL’s bloated employee benefit expenses, halving the losses till FY2011. However, revenue remained stagnant for four years after registering a major decline in FY19. Expanding the customer base and improving revenue earned per user will take care of shrinking revenues.

In 2005, BSNL commanded a market share of 21%, similar to Bharti Airtel and slightly higher than Reliance Communications. By 2022, BSNL’s share has come down to 10%, while the three private players control the rest of the market. Chart 1 shows the market share of wireless customers.

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Chart 2 shows the Average Revenue Per User Per Month (ARPU) earned by BSNL and other private companies. BSNL’s ARPU was ₹118 in March 2016 while private companies earned ₹126. The cheap tariffs with which Jio entered the market forced other players to reduce their charges. This affected the average revenue of both BSNL and other private service providers. However, the government telecom company’s ARPU suffered a major setback. When Jio started increasing tariffs, private companies also followed suit while BSNL did not. As a result, the ARPU of private players improved (₹136) and surpassed the pre-Jio levels but BSNL (₹53) did not catch up.

Relatively low earnings from existing customers along with declining subscribers took a toll on BSNL’s revenue. From ₹40,000 crore in FY06, revenue halved to ₹19,052 crore in FY22. While revenue declined, expenditure rose to over Rs 30,000 crore and remained above the mark for 15 years. Chart 3 shows the revenue and expenditure of BSNL in ` crore. As a result, BSNL has been continuously running in loss for the last 13 years. Chart 4 shows the profit and loss made by BSNL in ` crore.

Till FY20, employee benefits accounted for 40% of BSNL’s expenses. After the 2019 rescue package, a major part of which was used for funding the voluntary retirement scheme, the workforce was reduced from 1.8 lakh in FY18 to 64,500 in FY21. Nevertheless, the share of BSNL’s employee benefits in expenditure is higher than the share spent by private companies. Chart 5 shows the share of employee benefits in total expenses.

BSNL was instrumental in improving teledensity (connections per 100 people) in rural and remote areas. BSNL has been replaced by private players in the rural wireless segment, but BSNL remains the sole operator in the rural wire line segment. Rural wireless teledensity and broadband subscriber rates (per 100 people) have remained flat over the past five years, even as the urban-rural gap is widening. Hence, BSNL’s renewed focus on rural areas as a part of its social responsibility can help bridge this gap.

Source: TRAI, BSNL, BSE

Read also: explained | Government package to revive BSNL’s fortunes