Compel PSU staff to use BSNL, MTNL services: DoT

Move comes as an attempt to revive the two PSUs from its slump

The department of telecommunications (DoT) has recently suggested that public sector units (PSUs) should provide telephone bill reimbursements to their employees only if they use the services of state-owned BSNL and MTNL.

“For enhancing the market share of the two telecom PSUs, telecommunications services required by government, central public sector enterprises and autonomous bodies receiving grants from the government may be asked to seek BSNL and MTNL services only for wireline, wireless and broadband services,” the DoT said in a note prepared in early May, for a meeting with the group of ministers (GoM), which will take place on Friday.

This is, however, subject to provision of satisfactory service by these operators, which will be assessed by the DoT. “In order to incentivise the same, BSNL and MTNL would develop a concessional and preferential plan for government servants,” the note said.

The DoT says the dwindling market share of these operators is due to the “perceived quality” of services and the inability of the two PSUs to market their services. DoT wants preferential treatment for these operators.

MTNL, which provides services in Delhi and Mumbai, has a market share of 0.59 per cent, while BSNL which covers the rest of India, has a market share of 11.6 per cent. BSNL is the fifth largest operator after Bharti Airtel, Vodafone, Reliance Communications and Idea Cellular.

Both these companies have been posting losses for many years. As per the note, MTNL's networth will erode completely in the first quarter of 2013-14. BSNL is in no better position. Its net worth will be around Rs 50,000 crore, most of them locked away in fixed assets.

BSNL would make a loss of approximately Rs 8,198 crore by the end of 2012-13, as per unaudited financial results. MTNL has already recorded a loss of Rs 3,335 crore for three quarters until December, 2012.

Among many other suggestions to revive these companies, one is to provide voluntary retirement to one lakh employees of BSNL and 20,000 employees of MTNL. “The employee cost, as a percentage of revenue, is over 103 per cent for MTNL, and 49 per cent for BSNL, as against the industry average of three per cent. Both the PSUs are burdened with legacy issues that impact their bottom lines adversely,” the note said.

The revenue of these companies has been on the decline due to intense competition, inability of PSUs to leverage their technological strength, develop marketing and customer service, the DoT says.

“The allocation of BWA and 3G spectrum in all service areas at the price obtained in the auction in 2010 depleted cash reserves with MTNL falling into a debt trap arising out of the loans taken to pay for the spectrum,” the DoT said.