BSNL and MTNL are under tremendous pressure. Find out why

DUE to stiff competition from their private sector counterparts and a host of other factors, government-owned Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) are finding it bit tough to stay afloat as their incidence of debt has grown substantially during the last three years. Debt of the two telephone operators, which once enjoyed undisputed marker leadership, during the last three years increased due to...
the payment of 3G and BWA spectrum charges for which BSNL paid Rs 18500 crore and MTNL paid Rs 11098 crore in 2010. This information was given by Union minister of communications and information technology Kapil Sibal in Lok Sabha on Wednesday. He also said that the payments were made by MTNL by taking loans and by BSNL by drawing down from its reserves. The reasons for the rising debt of BSNL and MTNL are due to decline in revenue and increase in expenditure, the statement said. In so far as the loans of the two operators are concerned, as on March 31, 2011, whereas BSNL took no loans from banks, MTNL took Rs 7456 crore. After one year, on March 31, 2012, BSNL was in debt to the tune of Rs 1320 crore and MTNL during the same period took Rs 9647 crore from various banks especially PSU banks. On March 31, 2013, whereas BSNL took Rs 2561 crore as loan, MTNL took Rs 11779 crore from various banks. Finally, as on September 30, 2013, whereas BSNL took Rs 1541 crore as loan, MTNL took Rs 12587 crore as loan.
The revenues of the state-run telecom PSUs are declining due to substitution of fixed wire lines to mobile wireless, stiff competition in mobile wireless sector, payment towards 3G and broadband wireless access spectrum charges and decrease in average revenue per user (ARPU) in mobile sector, the statement further said. Another reason for the increase in expenditure is mainly due to large legacy workforce as a result of which employee expenses are currently at around 50 percent of revenues for BSNL and 103 percent for MTNL.
Earlier, in a bid to enhance the revenues of the two operators, Union government had proposed that all union ministries, PSUs and autonomous bodies give preference to the services of the state-owned telecom operators. "Proposing preferential treatment to BSNL and MTNL services in central government ministries and CPSEs and autonomous bodies to enhance the revenues earned by BSNL and MTNL," minister of state for communications and IT Killi Kruparani told Rajya Sabha recently.
The minister also said the government had constituted a group of ministers (GoM) on April 17, 2013 to recommend short term, medium term and long term measures for revival and revitalisation of BSNL and MTNL. Kruparani also disclosed that BSNL suffered a loss of Rs 7,884 crore in 2012-13 whereas MTNL's losses were Rs 5,321 crore in the same period. The GoM had made recommendations for payment of pension to the employees of MTNL on the pattern of BSNL, surrender of BWA spectrum by BSNL in six service areas and MTNL in Delhi and Mumbai for which refund will be paid to the operators. The GoM had also recommended waiver of unpaid portion along with the interest of notional loan of Rs 7,500 crore given to BSNL as part of the capital structure of the company at the time of its formation.
To improve their financial health and quality of service, BSNL and MTNL have  taken the steps like attractive tariff plans,  using latest IT tools to monitor the network, conversion of switches with latest technology of next generation network, optimisation of radio network through drive tests among others, the statement added.