What Is Killing BSNL? - An Inquiry

By: V G Kutty On: 7/29/2015

“If you want something you’ve never had, you must be willing to do something you’ve never done.”

-Thomas Jefferson

Introduction

My mobile phone rings. I am inside the house. I grab the phone and run out. It is the only way I can hope to connect with the caller. Outside I press the ’Answer’ button and shout ‘hello’. I hear nothing from the other end. I look at the phone screen. It shows ‘connected’. I disconnect and return the call. A recorded message tells me that the mobile number does not exist. I make another attempt. This time the message on my screen says, 'Radio Path Unavailable'. I do not go back into the house but wait for the caller to make another attempt. He does. The phone rings. This time we are fortunate. We speak for a few seconds. Suddenly, the line goes quiet. The call drops. It is an important call. I continue my wait outside. After two or three more call drops and muttered curses, we finish the call. Night or day, rain or shine, every time my mobile rings, this happens. I am a BSNL mobile customer…

Some time back, I read in the Hindu daily a news item on call drops and network problems faced by BSNL mobile customers in Kerala. It quoted a senior executive of BSNL saying that the Circle was taking steps to mitigate the problems by upgrading systems and installing more towers.  However, the same report carried the response of another BSNL executive saying that there was nothing wrong with the network and everything was hunky dory. I wonder why this guy is so utterly oblivious of the can of worms on which he sits.

“Why can’t they eat cake?” asked Marie Antoinette, the last queen of France, when the starving millions of France cried for bread. The aftermath was the French Revolution (1787-1799) and the brutal killing of the queen. In January this year, BSNL lost a whopping 12.37 lakh mobile phone customers. In March 2015, the surrender figure was 3.7 lakh.  This was against nearly one crore mobile phones added to the system that month by other service providers. Does the company really have grasp of the ground realities?

This post seeks to take a brief review of the reasons and realities of the present sorry state of affairs in BSNL.

The Amazing Story of Indian Telecom

The Telephone came into existence on March 10, 1876, thanks to five years of painstaking research by its inventor Alexander Graham Bell. In India, the first manual telephone exchange came up in Kolkata in 1882. Nothing spectacular happened for the next one hundred odd years. In 1994, India had just eighty lakh telephone connections with twenty-five lakh people in the waiting list. The tele-density (number of telephones per population of 100) stood at 0.80% against the global average of 10%. 

The Department of Telecommunication was the nation's sole telecom service provider. Fixed line was the technology available.  Then National Telecom Policy of 1994 changed he scene. Government monopoly over telecom ended with the entry of private players. The New Telecom Policy of 1999 triggered a dream run for the Indian Telecom. Indian Telecom grew surpassing the most ambitious forecasts. As at the close of March 2015, the number of telephone connections in India stood at 99.65 Crore (Wireless: 96.99; Wire line: 2.66).  India’s overall tele-density reached 79.38 (Wireless: 77.26; Wire line: 2.12). The country has achieved a one hundred-fold increase in its tele-density in just fifteen years.  This became possible thanks mainly to the entry of mobile technology.

With several big private players in the market, competition in the telecom sector soon turned aggressive. The Department of Telecom became just one of the operators competing for market share. With the proclaimed objective of making the Department of Telecom more autonomous and efficient to meet the challenges from the private operators, the government converted the Telecom Services arm of the Department into a Company. Thus, Bharat Sanchar Nigam Limited (BSNL) took birth on October 1, 2000. The expectations were huge. The fanfare was rousing. Unfortunately, fifteen years later the glamour has disappeared and the applauses have died down.  Today, BSNL is not even a major player in the Indian Telecom arena…

The Dismal Story of BSNL

Six months after its creation, BSNL had a market share of 77.73%. This meant that nearly 78 out of 100 telephone connections in the country were with BSNL as on 31.03.2001.  All the private players together then shared the remaining 22 connections out of a 100.  Things looked quite promising for the state-run company.

However, by 30.09.2012, the overall market share of BSNL had tanked to just 12.90%. By this time the private telecom service providers increased their market share from 22/100 connections as on 31.03.2001 to a whopping 87/100.  Mobile (Wireless) technology had more or less driven out fixed line connections from the scene. However, in the wireless segment, BSNL had a market share of just around 11%. The company was way behind its competition. 

BSNL management did nothing effective to arrest the downslide. By 31.03.2015, the overall market share of BSNL shrunk to 9.39%. Its share in the wireless segment was a mere 7.96%. In other words, BSNL mobile system connected only a measly eight out of a hundred mobile phones in the country. It has been great fall for the company.

Its steady fall in market share is reflected in BSNL’s financial performance data. The company is sinking more and more into the red. A cursory review of the historical profit and loss data of the company indicates the serious financial troubles into which it is steading slipping.

Financial Year	Profit/Loss    (Rs. Crore)
2005-2006	8940
2006-2007	7806
2007-2008	3009
2008-2009	575
2009-2010	(-) 1823
2010-2011	(-) 6384
2011-2012	(-) 8851
2012-2013	(-) 7884
2013-2014	(-) 7085

The sad reality is that while India has been celebrating its huge telecom success, the state-run company steadily went downhill… 

What is killing BSNL?

It is not easy to answer the question. Its failure is the consequence of the interplay of many complex issues. I have neither enough information nor the requisite expertise to deal with those issues. In any case, it is beyond the scope of a blog post. Nevertheless, I seek to discuss briefly three major factors, which, I believe, have substantially contributed to the present ills of this public sector monolith.  

1.      Political Interference

The avowed purpose of converting a wing of a government department to a government company was to grant the organization more autonomy. The government told that corporatization would equip the outfit with the professionalism needed to meet competitions in the market place. However, such pious declarations changed nothing on the ground.

Telecom was turning into a critical infrastructure and a driver of development. Amazing technologies and solutions leveraging on telecom were emerging. The market and the monies involved were mindboggling. Telecom was a treasure trove. No politicians would resist the lure of a share in this mouth-watering pie. So BSNL never had the freedom to operate as a business enterprise. It mostly danced to the tune of its political masters. More often than not when the politicians asked them to sit, the officials simply crawled.

Irrespective what they put out for public consumption, the loyalties of the politicians have seldom been with the state-run company.  Many a time they took decisions that seriously damaged the interests of this public enterprise. Often extraneous considerations drove decisions. For instance, mobile technology was the harbinger of telecom revolution. BSNL was ready to launch mobile service for the first time in the country. As the pioneer and a government company, it deserved the chance to do so.  However, the Minister would not give the green signal. The launch remained on hold.  While BSNL waited, a private telecom operator rolled out the service and captured the market. It took something like a year for the Minister to give the go ahead. The public response was huge. In many locations, the authorities had to call police to control the mammoth crowds that gathered to get a BSNL mobile connection. Sadly, that public enthusiasm would soon turn into public resentment.  

The political leadership blocked tenders, stalled equipment procurements and often, imposed unviable technologies and out-dated equipment on the organization. Politicians often had their private interests. While BSNL waited for the nod of the politicians, its competitors worked with frenzy to capture the market. We had a Minister who allegedly had whole telephone exchange installed in his business premises for its exclusive use. Another acted as if the whole telecom ministry was his personal property to be shared at his whim and fancy with his chums. The heart of the politician was seldom in the right place. If BSNL now finds itself in the doldrums, the responsibility should substantially rest with the political leadership, irrespective of their rhetoric and the colour of their party-flags.

2.      Management Incompetency

Charles Darwin wrote, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change”. Just as the ecology in which an organism lives undergoes constant changes, the environment in which an organization operates too experiences incessant changes. Survival depends on the speed and efficiency with which the organization anticipates and responds to such changes. Those failing would simply perish - be it an organism or an organization.

Corporatization led to no positive changes within the organization. The company continued to operate in its old bureaucratic ways.  The management had no skills or experience in running a commercial outfit in an environment of intense competition. Many were not adequately qualified to deal with the new challenges. They were experts in running a government department through its archaic processes and procedures. The people were hardened in their outlooks and attitudes after being long in their cozy and opulent ‘Public Servant’ cocoons to attempt to break out and face the discomfiting world of business and its staggering challenges.

In addition to the problem of lethargy and the lack of business acumen, BSNL had to keep almost its entire higher management personnel on some kind of ‘neither here nor there’basis. The Indian Telecom Service (ITS) officers declined to get absorbed as company employees. The government retained them in BSNL on deemed deputation. The then Telecom Minister had told the media that the ITS officers had five years to make a final decision on whether to get absorbed or get out. Now after fifteen years, those still in service continue to be ‘neither here nor there’. The ham-handed manner in which the authorities dealt with the Human Resource issues left so much of bad blood and confusion within the organization that it has long ceased to exist as a cohesive unit driven by a common purpose. Ownership and accountability became the casualties. The so-called external consultants roped in at enormous costs to suggest ways and means of improving matters, impressed all with their bewildering jargon and crispy business suits.  They pocketed their hefty fees and went away, leaving BSNL in more disarray. 

While BSNL wasted its attention and energies on superfluous issues, it ignored the reality of the environment around it changing. Government policies were changing, regulatory mechanisms were changing, competitions were changing, technologies were changing, the economic outlooks and structures were changing, customer needs and aspirations were changing… Those changes did not wait for BSNL to learn the ropes or settle its internal squabbles. The ground was fast slipping from underneath its feet while the management remained blissfully ignorant or unconcerned. 

3.      Knee-Jerk Decisions

Data is critical and precious for any organization. It is more so for business. Every business worth its salt relies on data to reach decisions. One wonders whether BSNL uses data analysis as a tool to support decisions. Individual notions and fancies seem to drive critical decisions in BSNL. Someone somewhere suddenly gets a brain wave and lo and behold, a decision is born.

Also, BSNL does not seem to realize that the price tag does not necessarily determine customer loyalty. Products from Apple Computers often have the highest price tag. Yet it enjoys the highest demand and customer trust. BSNL should wake up to the reality that serious telecom service users do not seek cheaper service. For such users, network availability and service quality are more critical. They would pay higher prices for better service and customer care.  Only such customers bring in the moolah. Marginal users would put up with bad service for its lower costs. They hardly make any positive difference to the bottom line.

  

BSNL provides the cheapest service. Yet its customers are not inclined to stick with it. As the company keeps losing customers, it goes on reducing tariff or granting discounts and freebies. Its revenues further dip leaving little to be invested in ensuring quality of service. As quality declines, more high-end customers leave. The whole process turns into a vicious circle. Being cheaper often ends up hurting the long-term prospects of the business. However, for reasons best known to it, BSNL continues with its destructive ways.

The latest in this series of concessions offered by the company for its landline customers is,‘unlimited free calls to any network and anywhere in the country’.  From May 1, 2015, this facility became available from nine in the night to seven in the morning.  Let us remember that the company has been in the red for the last six years in a row. In the landline segment, the company had recorded a loss of Rs.14,979 crore in 2013-2014. (The overall loss of Rs. 7085 crore for that year is the net after setting off the profit from mobile and other services). The story was no different during the previous years.  The losses were Rs. 13,445 crore in 2012-2013 and Rs. 12,669 crore in 2011-2012.

 

The offer of free calls may look irrational for many. However, the company considers it a big success. The head of a telecom district recently said that his unit received requests for 3000 new landlines. It has already provided 500 new connections. And he pats himself in the back for it! Would someone disclose the amount spent by BSNL  just for setting up those connections? What would be the net earnings from those connections?  Had anyone done a Cost-Benefit analysis or an appraisal of the Return on Investment? What is the basis on which BSNL concludes that it is a financially prudent decision?  BSNL should perhaps look back and see what it achieved by such concessions and freebies in the past.  Had lower tariff and freebies brought bonanzas for BSNL, it would not have found itself in such dire straits today.

Let us look at some relevant data on the landline business of BSNL. The number of landline connections BSNL had as on 31.03.2015 was just 1.66 crore. In the year 2013-2014, the average number of fixed phones were around two crore. The company had lost nearly Rs.15,000 Crore for servicing those landlines. A simple calculation shows that BSNL lost roughly Rs.7500/- per every landline connection in 2013-2014. The landline service is bleeding the company white. Any other service provider would have tried to cut down costs, increase tariff or shutdown the segment. Euripides   had rightly said, "Those whom God wishes to destroy, he first deprives of their senses."

While I hate to burden the reader with more statistics, it is necessary that we look at one more piece of data. The statistics for March 2015 released by the Telecom Regulatory Authority of India (TRAI) shows that with a market share of 19.03%, BSNL ranks at No.3 in the Broadband segment. The operators higher in rank are Bharati (22.19%) and Vodafone (19.53%). Interestingly, BSNL has almost one crore (99.6 lakh) broadband connection over its 1.66 crore landlines. (Assuming wired broadband connections are riding on land phone connections). However, it has only 89.20 lakh broadband connections over its 7.72 crore mobile connection. In other words, 60% of BSNL landlines have broadband over it while only less than 12% of its mobile customers have broadband. It looks that there is substantial demand for broadband over fixed line. This being the reality, the company should be  increasing the tariff for ‘voice alone’ landlines rather than offering discounts. Let 'voice alone' customers either surrender their connections or opt for broadband over it. For the future, BSNL should adopt a policy that it would give landline connections along with broadband only. Would BSNL dare it? Would the political leadership permit it? Your guess is as good as mine.

Conclusion

Recently I encountered a problem with some transactions related to my account with the State Bank of India. I went to their website looking for their complaint redressal mechanism and found a simple document. I wrote a complaint and sent it to an email id found in the document. To my disbelief, I received an interim reply within hours. My complaint was resolved to my total satisfaction within 24 hours. And a senior officer wrote to me regretting the inconvenience caused to me. I never received such prompt responses even from the so-called new generation private banks. No wonder State Bank of India remains one of the most trusted Indian brands.

Now, here is an instance of my experience with BSNL. Sometime back, a friend told me that his landline was dead. He had complained. When nothing happened, he went and met the local Sub Divisional Engineer. Then he wrote to the Divisional Engineer, General Manager and the Chief General Manager. Weeks and months passed. Nothing happened. He asked me whether I would help.  I drafted a complaint and asked my friend to send it by email to the ids I found at the BSNL website. We waited for weeks. Nothing happened. None bothered to respond. Months went by. Phone bills continued to arrive. In spite of the dead phone, he paid them all. Eventually, it so happened that there was a marriage of a girl in the neighbourhood. The bridegroom was a BSNL employee. The couple came to my friend’s home to seek his blessings. He then told the ‘just married’ BSNL boy about the problem with his phone. He went outside and opened the internal cable termination point. He found the wire broken. He reconnected the wire and the phone came alive. (I hope the situation has since improved after the commencement of complaint booking through the IVR system).

I have mentioned my contrasting experiences just to emphasis the criticality of customer care. BSNL still suffers from its ‘Sarkari’ hangover to realize that it is running a business and it cannot hope to survive without ensuring prompt and effective customer care. The Telecom Minister recently said that BSNL would become profitable by the year 2018. I hope this would happen. I hope the Minister already has the blueprint for turning the company around. I also hope that the Minister is aware of the plethora of reports given by celebrated committees constituted in the past to recommend ways of improving the performance of the company, long gathering dust in his ministry.

Irrespective of what the Minister would do, or the committees had recommended, matters simply would not improve in BSNL without drastic internal changes. The attitude of people has to change. The organizational culture has to change. Ownership and accountability must become imperative. There must be a recalibration of priorities. The company should make customer its focal point. It should wind up unviable operations and projects. The organization as whole must become leaner and meaner.  Also, there must be budgetary support for activities undertaken and concessions offered on the behest of political leadership. (An SMS I received some time back says that there would be no charges for incoming calls while roaming thanks to the dynamic leadership of the present Prime Minister. Would the government compensate the consequent revenue loss suffered by BSNL?)

Let me now close. Louis Gerstner Jr. is a globally renowned CEO who had saved the computer giant IBM from the verge of collapse. In his international best seller, ‘Who Says Elephants Can’t Dance’, he recounts his struggles to turn around the company. He believed that IBM needed a new outlook and  organizational culture. He lists eight principles, which he tried to enforce as the underpinnings of IBM’s new culture.

I list those principles below since I believe that more than anything else, what BSNL needs today is a change in its organizational culture.

1.     The market place is the driving force behind everything we do.

2.     At our core, we are a technology company with an overriding commitment

        to quality.

3.     Our primary measures of success are customer satisfaction and

        shareholder value.

4.     We operate as an entrepreneurial organization with a minimum of

        bureaucracy and a never ending focus on productivity.

5.     We never loose sight of our strategic vision.

6.     We think and act with a sense of urgency.

7.     Outstanding, dedicated people make it all happen, particularly when they

        work together as a team.

8.     We are sensitive to the needs of the employees and to the communities

        in which we operate.

To read more articles by the author, visit his blog at www.wisdomspot.org