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 firms revenue estimates as stated in its presentation to a group of ministers as highly optimistic and impractical. If the assumptions are right, BSNLs 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