3 years after first bailout, BSNL continues to bleed and lose market share

Three years after its Rs 69,000-crore bailout package, government-owned Bharat Sanchar Nigam (BSNL) continues to bleed and lose market share in the telecommunication (telecom) market.

The company reported a net sale of Rs 16,809 crore in 2021-22 (FY22), down 3.7 per cent from Rs 17,452 crore a year ago and loss of Rs 6,982 crore - a marginal improvement from Rs 7,441 crore in 

2020-21 (FY21).

It has now cumulatively lost Rs 1.02 trillion in its operations in 13 years - one of the biggest loss-making streaks in the corporate sector. The telecom major had last reported net profit in 2008-09.

BSNL’s revenue share of the domestic telecom market declined to a record low of 8.5 per cent in FY22, down from 9.4 per cent a year ago and 16.7 per cent in 2017-18.

Private telecom operators continue to erode its wireless, broadband, and fixed-line business.

The combined net sales of all domestic telecom operators was up 5.8 per cent in FY22, unlike the revenue contraction reported by BSNL. The industry growth was led by Bharti Airtel and Reliance   

Jio - both continue to raise their revenue market share at the expense of other telecom operators.

The company’s continued losses and steady defeat in market share raises doubts over the success of a new bailout package worth Rs 1.64 trillion approved last week.

BSNL had used the first bailout package approved in July 2019 to fund a voluntary retirement scheme to trim its workforce and sharply reduce employee expenses that were a big part of its operating cost.

The number of employees declined nearly 70 per cent, from 205,000 at the end of March 2017 to around 70,000 at the end of March 2020, according to the Capitaline database.

As a result, the company’s salary and wage bill declined 59 per cent during the period, from Rs 16,300 crore in 2016-17 to Rs 6,761 crore in FY21. This provided financial succour and helped it 

report its first operating profit (or earnings before interest, tax, depreciation, and amortisation) in four years in FY21, while net loss had nearly halved over the previous years.

The financial gains from a decline in employee cost are, however, proving to be transitory due to steady contraction in revenue from operations and rising interest burden. The company’s interest 

cost has more than trebled in the past three years, from Rs 785 core in 2018-19 to Rs 2,617 crore in FY22, straining its bottom line.

The company reported a core operating loss of Rs 1,300 crore in FY22, excluding other income of Rs 2,243 crore last financial year. By comparison, it had reported core operating profit of Rs 49.2 

crore in FY21 – the first in the past six years. Its other income largely came from interest on its bank deposits and write-back of excess liability that it had written off in the previous years.

According to the government plan, BSNL will use the new revival package to deleverage its balance sheet by converting a large part of its debt into government equity and roll-out of 4G mobile and 

broadband services. The company also plans to raise nearly Rs 40,000 crore by issuing long-term bonds.

The latest revival package will help it slash its ballooning interest burden, but gains from this will be short-lived unless it manages to expand its customer base and raise its shrinking revenue share.