Kapil Sibal urges PM to form panel to revive BSNL and MTNL

 NEW DELHI: With state-owned telcos BSNL and MTNLBSE 2.81 % on the verge of financial collapse, telecom minister Kapil Sibal has urged Prime Minister Manmohan Singh to set up a panel of ministers to look into revitalising the two public sector mobile phone companies.

Currently, an empowered group of ministers (EGoM), headed by
finance ministerP Chidambaram, looks into all spectrum-related issues for telecom.

The telecom department has also approached the Union Cabinet seeking a 23,000 crore bailout for BSNL and MTNL.

ET recently reported that DoT had sought Cabinet approval for the Centre to bear the one-time spectrum fee for state-owned telcos and also refund part of the 4G airwaves costs of these companies as they had surrendered this spectrum in 2011, citing lack of a business case.

Sibal, in his communication to the prime minister, said while results for 2012-13 were yet to be declared, he expects MTNL's net worth to be completely eroded while adding that BSNL was expected to declare a loss of 10,000 crore during the same period.

"Due to change in business environment and hyper competition in the telecommunication market, the financial position of BSNL and MTNL had deteriorated in the last 3-4 years. Unless immediate steps are taken to revive and revitalise these PSUs, they would turn sick shortly," Sibal added.

BSNL, which offers services in all regions except Mumbai & Delhi, had registered a loss of 8,851 crore in 2011-12 and MTNL about 4,110 during the same period.

Sibal also told the PM that the government had implemented most recommendations of the panel headed by technocrat Sam Pitroda that had suggested several measures in its report in 2010 to revive the flagging fortunes of BSNL. This panel had constituted of banker Deepak Parekh and then telecom secretary PJ Thomas.

"However, the environment has changed significantly since then. Immediate action together with financial support would be required to put these two PSUs back on track," Sibal's communication to Mammohan Singh added.

But Sibal's stance that most of the Pitroda panel recommendations have been implemented sharply contradicts the ground reality. This panel's key recommendations that BSNL undertake a strategic stake sale, cut its three lakh staff by a third and sell 30% of the company in an initial share sale have just remained on paper.

In fact, in late 2010, a government panel has rejected some key recommendations of the Sam Pitroda committee set up by the prime minister to suggest a turnaround strategy for loss-making BSNL, saying drastic changes in a state-owned company could impact the running of all public sector units.

This four-member department of telecom panel had rejected the Pitroda committee recommendation that BSNL sell a 30% stake by listing on the bourses, and said the IPO must be 'deferred for two years to allow the telco improve its performance and get the right valuation'. It has also rejected the Pitroda committee's proposal to allow BSNL to bring in top professionals, including a CEO from the private sector, and said that "implementing such a move selectively for top-level positions, and also in just one PSU, would have wider repercussions".

BSNL has been deteriorating in financial performance over the years as it could not expand in time. It could not compete with the nimble-footed private mobile phone firms which were taking decisions quickly. The state-owned telco's performance has been touching new lows every year since 2007. It posted a loss of 1,822.65 crore for the year to end-March 2010, a first in the company's history and losses have mounted every year since then.

In January this year, in a rare show of unity, industry bodies representing both GSM and CDMA operators in a joint letter to Sibal had said that financial support for BSNL and MTNL 'was not permissible as it would be in contravention of all tenets of policy, fair competition and level playing field', while added that under current rules 'assures all level-playing field for all operators'.