State-run Bharat Sanchar Nigam (BSNL), which has been posting losses for the last five fiscals was handed a Rs 6,724-crore bailout by the government on Thursday; the telco surrendered its broadband spectrum and said it could post profits in FY18 if the government agreed to bear 50% of its wage bill.
Analysts, however, dismiss the firm’s revenue estimates as stated in its presentation to a group of ministers as “highly optimistic” and “impractical”. If the assumptions are right, BSNL’s turnover in the next four years will increase by a whopping 50%, growing at around 12.5% per year, putting it in the league of a Bharti Airtel or an Idea Cellular.
BSNL has based its growth projections on a combination of factors that include growth in broadband and wireless services, government support to reduce wage bill by 50% and monetisation of towers. It also hopes to arrest the decline in landline connections and increase its mobile user base from 98 million to 140 million with a 50% increase in data revenue while maintaining its current market share over the next four years.
However, BSNL has not outlined a strategy that will help it achieve the numbers. Its subscriber market share in the mobile segment has remained static at around 11% in the last five years. Only around 56% of its total subscribers are active and its wireline user base has been constantly declining to stand at around 24 million as on date.
Neither has it come forward with a manpower reduction plan. Its wage bill amounts to 50% of its total revenues of around R27,000 crore. Even if the government bears 50% of the wage bill, at the end of FY18 it would constitute 37% of its total projected revenue of R41,305 crore. For private sector mobile firms, the wage bill constitutes around 5% of their revenues.
There is also no plan to reduce costs — in FY14, total expenditure is expected to be R37,210 crore on a revenue of R28,047 crore. And BSNL has targeted an expenditure of R41,229 crore on a revenue of R41,305 crore in FY18. Even if these numbers were to materialise, the telco can at best break even, not post profits. Worse still, while the company has projected a revenue growth from 3% to 9% in the next four years, it has said that its wage bill would go up by around 15%.
How successful the company can be in its turnaround plan, based on optimistic revenue growth plan can be gauged from the fact that it could not monetise the early start it got in 3G services over its private sector counterparts. Having got the 3G spectrum two years ahead of private sector companies, the company’s 3G subscriber base is far lower than any private sector operator and still it has based its future growth on data services.