BSNL FINDING A WILL TO SURVIVE
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BSNL turnaround under NDA govt
New head of BSNL was appointed on 1/15 to increase market share and bring it back to profit. BSNL has been pursuing various profitability paths for the last 2 years. One plan is to earn money by sharing its idle assets. Since RJio happened it is striving to maintain market share.
BSNL has remarkably low debt by industry standards. A debt of just Rs3,200cr attracts low interest costs. Depreciation and amortization affect long-term ability to replace assets so they are not an immediate threat to survival. Thus turning in operating profits (before interest, tax, depreciation & amortization) is a very significant first step. BSNL achieved this by turning Rs690cr loss in 2013-14 into profits of Rs670cr and Rs3850cr in next two years. It reckons it will turn in net profits from 2018-19.
How will it earn more profits in this super-competitive market?
By growing data revenues in a growing market, earning rent from its infrastructure and by lessening the salary burden. Also BSNL will lower its debt ratio and eventually retire all debt.
Its customer base is very cost-conscious (as it doesn't operate in Delhi or Mumbai). Thus it has followed RJio's lead and aggressively cut tariffs on voice and data. For example, BSNL was first to respond to RJio's unlimited offer. It upgraded its data useage and made voice free for 6 months! Its willingness to fully match rivals including RJio has kept its subscriber base intact, even as private sector rivals saw massive erosion. “Our market share slightly improved last year,” BSNL chairman Shrivastava said.
AVENUES FOR GROWTH AND PROFITS
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Network sharing
BNSL has surplus infra due to its low growth and public obligations build out. Telecom network sharing model, initiated in 2015, is a means of earning extra revenue from its spare capacity. It has earned Rs 1,500cr in 2016-17. It expects to double this to Rs 3,000cr this year. Most players are interested in mobile towers. Among other deals it has a 2G intra circle roaming pacts with Bharti Airtel, Vodafone India and Aircel, and 2G and 4G services pact with RJio.
Asset monetization
Monetization plan has a potential to give a huge capital boost to the telecom PSU. KPMG is evaluating 15,000 land parcels covering Ahmedabad, Jaipur, Lucknow, Pune, Chennai, Kolkata, Mumbai and Delhi, among others. The valuation is pegged at Rs 65,000 crore, which is a massive increase from a book value of Rs 975 crore, a decade ago. It has already submitted a proposal to monetize eight properties particularly in Delhi and Mumbai that may fetch around Rs 2,000 crore. It aims to lease the land for revenue.
Salary outgo
In 2015-16, BSNL spent nearly Rs 15,000 crore on salaries (or 50% of annual turnover) for over 200,000 employees. In contrast top 2 private firms spent 5% of turnover and employed between 13,000 to 20,000 people. BSNL was unable to afford the voluntary retirement package but can still achieve significant savings in the next two years. “Nearly 10% staff goes off the rolls every year as they enter retirement. We are not filling new positions."
More below>
BSNL turnaround under NDA govt
New head of BSNL was appointed on 1/15 to increase market share and bring it back to profit. BSNL has been pursuing various profitability paths for the last 2 years. One plan is to earn money by sharing its idle assets. Since RJio happened it is striving to maintain market share.
BSNL has remarkably low debt by industry standards. A debt of just Rs3,200cr attracts low interest costs. Depreciation and amortization affect long-term ability to replace assets so they are not an immediate threat to survival. Thus turning in operating profits (before interest, tax, depreciation & amortization) is a very significant first step. BSNL achieved this by turning Rs690cr loss in 2013-14 into profits of Rs670cr and Rs3850cr in next two years. It reckons it will turn in net profits from 2018-19.
How will it earn more profits in this super-competitive market?
By growing data revenues in a growing market, earning rent from its infrastructure and by lessening the salary burden. Also BSNL will lower its debt ratio and eventually retire all debt.
Its customer base is very cost-conscious (as it doesn't operate in Delhi or Mumbai). Thus it has followed RJio's lead and aggressively cut tariffs on voice and data. For example, BSNL was first to respond to RJio's unlimited offer. It upgraded its data useage and made voice free for 6 months! Its willingness to fully match rivals including RJio has kept its subscriber base intact, even as private sector rivals saw massive erosion. “Our market share slightly improved last year,” BSNL chairman Shrivastava said.
AVENUES FOR GROWTH AND PROFITS
Network sharing
BNSL has surplus infra due to its low growth and public obligations build out. Telecom network sharing model, initiated in 2015, is a means of earning extra revenue from its spare capacity. It has earned Rs 1,500cr in 2016-17. It expects to double this to Rs 3,000cr this year. Most players are interested in mobile towers. Among other deals it has a 2G intra circle roaming pacts with Bharti Airtel, Vodafone India and Aircel, and 2G and 4G services pact with RJio.
Asset monetization
Monetization plan has a potential to give a huge capital boost to the telecom PSU. KPMG is evaluating 15,000 land parcels covering Ahmedabad, Jaipur, Lucknow, Pune, Chennai, Kolkata, Mumbai and Delhi, among others. The valuation is pegged at Rs 65,000 crore, which is a massive increase from a book value of Rs 975 crore, a decade ago. It has already submitted a proposal to monetize eight properties particularly in Delhi and Mumbai that may fetch around Rs 2,000 crore. It aims to lease the land for revenue.
Salary outgo
In 2015-16, BSNL spent nearly Rs 15,000 crore on salaries (or 50% of annual turnover) for over 200,000 employees. In contrast top 2 private firms spent 5% of turnover and employed between 13,000 to 20,000 people. BSNL was unable to afford the voluntary retirement package but can still achieve significant savings in the next two years. “Nearly 10% staff goes off the rolls every year as they enter retirement. We are not filling new positions."
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AVENUES FOR GROWTH AND PROFITS------------------------------------------------------------
MVNO business
With the government releasing mobile virtual network operator (MVNO) guidelines in June 2016, BSNL is looking to tap this opportunity to put its under-utilized network to use specially in semi-urban and rural regions.
The telco has identified MVNO business as one of the key potential areas although the tariffs in the recent past have come down sharply making such as business bit unviable. MVNO business allows incumbent telcos to offer voice minutes and data bandwidth to retailers in bulk to further resell.
“We expect to get Rs 500 crore from the VNO business annually which will increase incrementally,” Shrivastava said, adding that MVNO gives an opportunity and the BSNL Board has already identified it as a good revenue driver.
Enterprise business
The telco is focusing to strengthen its enterprise business and aims it to contribute at least 30% of the overall revenue. BSNL has over 20,000 business customers including large public sector firms such as the Reserve Bank of India and State Bank of India.
With a Wi-Fi initiative, telco plans to tap potential in places of historical, tourism and religious significance. The business model, however, is still in pipeline, BSNL plans to deploy a total of 1 lakh Wi-Fi hotspots by March 2019, a part of it would be operationalized through the Universal Service Obligation (USO) fund and revenue sharing venture.
Satellite phone business
The state-driven telecom major has recently forayed into a satellite-based voice and data services in collaboration with Inmarsat, a global satellite network, and plans to offer commercial services from 2018. BSNL has aggressive plans to provide satellite phone calls to private companies and persons, as well as offer in-flight communication (IFC) services via air carriers as well as make Internet and voice calls viable in ships, providing a new revenue stream altogether.
Shrivastava said that the telco has already received due approvals from the Ministry of Home Affairs (MHA) and the Department of Telecommunications (DoT), and added that BSNL has become a sole licensee to provide satellite-based services. Inmarsat has already installed its equipment at company’s premises after being tested for law enforcement purposes.REPLY Oct 7, 2017
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