The decline of BSNL

The parallels between state-owned BSNL and Air India are striking, the only difference being that the latter is perhaps a few years ahead on the declining curve. Interest income has allowed the telecom major BSNL to remain in the black even as it makes operating losses.

But if it continues on the current path, it is a only a matter of time before it rushes to the government for a dole, a situation Air India finds itself in today. Policy and paralysis of decision making has held back these former market leaders, allowing the private sector to occupy the space vacated by them.

Air India had to wait over a decade to expand its fleet as successive governments dragged their feet. BSNL, on the other hand, has suffered because of equipment delays, even as the telecom sector thrived. Being a state-owned company it has to follow a prescribed procedure while tendering for equipment and, more inimically, put up with political and administrative whims.

Effectively, it has been asked to compete with feisty private sector rivals with one hand tied. Over the last 24 months, BSNL has not awarded any major contract for mobile networks and equipment. The capacity constraint has meant Bharti Airtel has over the last 12 months added nearly three times new subscribers compared to BSNL.

BSNL now stands a distant fourth, behind Bharti, Reliance and Vodafone. While aggressive number additions have made up for the declining average revenue per user for the private sector operators, BSNL has no such cushion.

Mismanagement, deliberate or otherwise, is largely the reason why these companies are in a mess. Interestingly, both BSNL and Air India are not listed. Their performance comes up for public scrutiny only occasionally, more frequently in the case of Air India as it needs government help to stay afloat.

In contrast, listed PSUs are subjected to a close stakeholder scrutiny quarter after quarter. It is time these entities are allowed to function on commercial terms, even while retaining their public sector character. A successful and large state-owned sector in France and Scandinavian countries suggest this is possible.

Sure, listing is not a panacea for all ills, but to the extent it subjects these companies to some market discipline, it is a desirable first step.