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The impending change of guard at the public sector operator BSNL, definitely needs to bring in mega makeovers else little will change in the way the service provider has been performing.

Sam Pitroda, the 'Transformer' has submitted his fifteen point report to the department of telecommunications, prescribing remedial strategies for the ailing operator. A search and selection team has been constituted by the Prime Minister's Office to appoint a new chairman soon after the present CMD Kuldeep Goyal retires. VOICE&DATA spoke to regulatory experts, analysts, financial consultants and industry veterans to find out their views on what will turn the table around for BSNL. Our industry gurus put together a 'things to do list' for BSNL and the new leader; and they are not very different for what has already been communicated to the DoT.

The Prescription
The telecom mammoth has been crippled by multiple ailments and needs solutions to all if not in a go, then may be some more urgently. BSNL cannot be turned in to a one man army overnight, with about 3 lakh soldiers (read employees) unified by a strong union. If the union decides to be non-cooperative, the entire system can collapse. An example of their strength can be gauged from the fact that the Joint Action Committee (JAC), represented by 3 lakh executives and non-executives of the company is likely to call for a three-day sit-out strike from September 21 this year to register their protest in case the government fails to resolve the issue of refunding BSNL's 3G fee within a reasonable timeframe. There are several concerns over the company's current financials, profitability, etc.

Policy-the Dikat
A big bolster in BSNL's growth path is its internal deficiency born out of a distorted policy system. The Comptroller & Auditor General (CAG) report (No PA 27 of 2009-10) on BSNL's performance opened the company's can of worms. CAG pointed out systemic deficiencies in planning, procurement of equipment and stores, quality of telephone services, and execution and monitoring of long distance projects. It also found compliance deficiencies, which undermined the overall performance.

Some blunders that BSNL officials have made over the years to push BSNL where it has reached today-include making unrealistic forecasts for the new projects that led to the projects being stuck, they have failed in making the correct estimates of demand of equipments, delays in procurement-have been a well-known trouble maker for BSNL.

All the shortcomings-audit noticed compliance deficiencies in telecom project circles, its divisions and sub-divisions, such as violation of corporate office instructions, delegation of financial powers and provisions of procurement manual-undermined the overall performance of the telecom project circles and the company. The company has failed to excercise control on budgets.

Scrap Bin
The tender process at BSNL was crippling too. Nokia Siemens Networks dragged the company to the court challenging its disqualification from the tender for 93 mn lines, the world's largest contract for telecom equipments. BSNL's expansion plans got a serious blow from the litigation, and new private players were growing, worsening the situation for the PSU. Handicapped by equipment shortage, the company was unable to add new subscribers resulting in a loss of market share.

Stung by the crisis, BSNL changed its equipment procurement policy and decided to do as the competition like Bharti Airtel and Vodafone did. It would opt for a managed capacity system under which the services are outsourced to a vendor who then takes care of all the procurement needs; however the government stepped in saying that outsourcing network maintenance to global players could put national security under threat.

Lack of transparency in the company's bidding process to select its franchise partners for WiMax got a major setback as five of the twenty bidders turned out to be fake. The Joint Forum of BSNL Associations, suspected a senior officials' role here. Thus, another tender went to the scrap bin.

According to CAG's report of the material management and planning wings of headquarters, during 2003-04 to 2007-08, requirements for 5,224 pieces of equipment of various categories were placed and finalized. However, only 3,653 pieces of equipment were approved and only 1,603 were actually procured during 2003-08. Barely 31% of the equipment in demand was procured by the headquarters. These delayed procurements resulted in non-completion of sixty-six projects (out of 153 projects selected by audit).

The Great Fall
BSNL had been the largest telecom operator till 2008, when Airtel steered ahead. By mid 2008, Bharti was adding about 2.5 mn customers each month while BSNL's subscriber base was inching up by 6 lakh each month. The landline connections were fast picking up for Bharti, though they constituted just a meagre 3% of its subscribers. For BSNL the landline subscribers constituted slightly less than half. Then Bharti Airtel had over 69 mn subscribers in June, and was growing at an average of 3% while BSNL, was growing at less than 1%, adding around 3 lakh subscribers each month. Airtel has grown manifolds that it can now dare to look at acquisitions beyond Indian soil and now has operation in about eighteen countries across Asia and Africa.

The Panacea
The Indian telecom industry sees the last ray of hope for the wilting operator in empowering the CMD with more powers instead of employing a putty in the hands of the ministry. Even the brightest ideas collapse if not given freedom to execute, and perhaps this has been one of the key reasons why nothing has worked for the company.

“Hiring a dynamic manager may not help the company till the person in chair has the powers to create his/her own team that can execute the plans. A disconnect between the leader and his subordinates will further worsen the scenario thus, the new CMD should have the powers to hire his/her team independently,” says Satyen Gupta, chief regulatory officer, British Telecom.

Kunaj Bajaj, director, India, Analysys Mason, agrees that more independence from ministry/government is critical for making a faster decision making process. This will help BSNL in taking prompt decisions. “However, independence does not necessarily means privatization and selling off strategic stakes, in fact it could be arming the CMD to make independent decisions while still keeping a control,” Bajaj says.

Sandeep Gupta, director, Protiviti Consulting sees bigger challenges for the new head of the company who will have to tackle both existing and upcoming competition. “There are certain old legacy issues to resolve along with restructuring the organization to enable it to transform itself for the future growth,” he says.

DoT has not cleared whether it will be able to offer market linked salary to the suitor for the top post. The salary will be fixed on the basis of Schedule-A PSUs, along with the performance related pay and other facilities like free accommodation and a car.

The package comes to about Rs 45 lakh per annum with an entry level basic pay of Rs 80,000. The scale ranges up to Rs 1,25,000. Industry veterans feel it will be difficult to convince a talent from the corporate world work under restrictions and most important factor will be the fact that pressure comes at what price.

The DoT plans to appoint the new managing director for a fixed tenure of three years, extendable by another three years, based on performance evaluation by an external group. However, the transformation will be a tough task. “It will be a long term job as a leader will require at least five years to show some positive results,” says Bajaj.

A change that is much-needed, and will face strong opposition is pruning about one lakh excess employees. A strong union of employees may not be cooperative and add to the woes of the company which at present is the third biggest employer in the country and spends about 50% of its revenues on employee salaries. Over 60,000 employees are scheduled to retire in five years and the board plans to sign Rs 4,348 crore wage agreement with staff. The mammoth's revenue per employee or productivity is one of the lowest in the industry. In FY 2009-10 Airtel stood at Rs 21 mn per employee, RCom earned about Rs 6.7 mn per employee.

Functional separation plays a critical role in the growth of an operator like BSNL. It is time BSNL separates its retail and wholesale businesses into seperate divisions and sets up a stringent target for each one. This will unlock the wholesale business opportunity for BSNL which is currently under-utilized. While all private operators have well differentiated their retail and wholesale businesses, BSNL's assets to handle wholesale traffic has been under exploited.

Infusing new ideas through processes for services product planning and go-to-market strategy by hiring experienced management team from the private sector can indisputably make a difference to what the consumers want.

The average age of a BSNL employee is thirty-five to forty years, thus there is a void of young talent. While the employees of private operators are much younger. Thus, to be able to market itself in the era of hyper competition, BSNL will have to the match standards of the private players.

The government will have to give autonomy. In the past political lobbies have affected the telecommunications industry. Not to forget, 45 mn mobile lines order that was sought by the former IT and telecom minister Dayanidhi Maran, was scrapped immediately after A Raja replaced Dayanidhi as the minister. The PMO's decision to set up a selection committee is only a small way in the direction of BSNL's long journey.

Heena Jhingan
heenaj@cybermedia.co.in

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