BSNLLatestDevlopmentPlan

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Monday September 28, 03:45 AM Source: Indian Express Finance
BSNL to shift most staff to new firm
By Anandita Singh Mankotia
Before firming up plans to list state-owned telecom service provider Bharat Sanchar Nigam Ltd (BSNL) on the stock exchanges, the government is working on a plan to trim the company's bloated employee size.
A proposal finalised by the company's administrative ministry, the department of telecommunications, says about two-thirds of BSNL's employees would be shifted to a newly created PSU, the National Optic Fibre Authority (Nofa).
BSNL now has over 3 lakh employees, of which around 2 lakh would be shifted to the proposed Nofa, which would have the mandate to lay optic fibre across the country and then lease that network to telecom firms for providing broadband services.
"We are planning to transfer around 2 lakh employees of BSNL to the proposed National Optic Fibre Authority," a DoT official confirmed to FE. As earlier reported by FE, the government would set up the authority to lay over 12 lakh km of optic fibre throughout the country, spending around Rs 40,000 crore. "The mix-and-match would be perfect. BSNL needs to shed staff while the newly created PSU would need people," the official said.
The biggest contributor to BSNL's miserable financial position has been the stupendous wage bill of Rs 10,000 crore. This represents a wage to turnover ratio of 28% compared to 4.6% for its private sector rival, Bharti Airtel (BHARTIARTL.BO : 359.4 0 ). This year, owing to a wage revision, BSNL's salary bill would go up by Rs 2,000-2,500 crore.
BSNL's profitability has been declining over the years. In 2008-09, its net profit declined 81%, its worst ever, to Rs 574.85 crore. However, its total revenue, at Rs 35,811.92 crore, saw a marginal growth over a year-before revenue of Rs 32,360 crore.
With operating costs slated to climb by around Rs 1,600 crore this financial year, together with the higher wage bill, the company is projected to post losses of around Rs 4,500 crore, its first since its inception in October 2000.
The government plans to come out with an initial public offering (IPO) of BSNL to divest 10% of its stake, but no timeframe for this could be set due to staff resistance.
But before going in for an IPO, the government has to spruce up the financials of the company to make the offer attractive to institutional buyers as well as to receive a good price for the shares. The easy option here is to cut the company's expenditures than trying to increase its profitability and revenue. By transferring most employees to another entity, BSNL will be able to vastly cut its wage bill, thereby, projecting improved financial health.
BSNL is in the process restructuring itself to better compete in the increasingly tough telecom market. The company, for instance, recently recast its structural operations upon the recommendations of consulting firm BCG. Accordingly, the company would focus on four key operations, namely; consumer mobility, broadband, enterprise business and new business, which includes infrastructure sharing.