State-owned Bharat Sanchar Nigam Ltd, which had been seeing a steady recovery in its financial condition in the last three years, found it difficult to keep the recovery going in FY17.
According to the latest data given by the Department of Telecom, the company reported a net loss of Rs 4,786 cr for the year ended March 2017, only marginally better than the loss of Rs 4,875 cr in the previous year.
With this, the company has posted total losses of around 53,000 cr in the seven years starting from the year 2009-10.
The loss number also indicates that the sharp improvements seen in the company’s finances in the last 2-3 years have lost much of their steam due to the bloodbath in the telecom market.
In 2015-16, for example, BSNL was able to report a sharp improvement in its financial condition.
In that year, the company’s net loss fell to Rs 4,875 cr from Rs 8,234 cr in the previous year and it also reported nearly six-fold jump in operating profit to Rs 3,855 crore.
2016-17 was supposed to be even better, continuing the recovery. But the early impact of heightened competition due to the introduction of 4G services seems to have put the brakes on the recovery during the year.
As a result, the net loss declined by only 1.8% during the year.
DEBT
The modest improvement is despite the government giving about Rs 6,724 cr to the telco as refund for the surrender of 4G spectrum in six circles.
Because of this one-time inflow of cash, BSNL was successfully able to bring down its ballooning debt burden in 2016-17.
Net debt on BSNL’s books fell to 3,813 cr from Rs 7,883 cr during the year — a reduction of about Rs 4,000 cr.
Such a reduction should have reduced the company’s interest costs by about Rs 400 cr per year, which should have resulted in a reduction of at least Rs 400 cr in the net loss.
However, the actual reduction in net losses was only to the tune of Rs 89 cr, indicating that the company saw margin slippages at the operating level.
REVIVAL PLAN
The government has put in motion the preparation of a comprehensive revival plan for both BSNL and its metro-cousin MTNL with the help of external consultants like Deloitte.
“Both companies have been declared as “Incipient Sick” as per the guidelines of Department of Public Enterprises,” DoT said today.
“A consultant has submitted its report regarding revival plan of MTNL which is under consideration. Regarding BSNL, the preparation of revival plan is under process,” it added.
The Deloitte report suggest that MTNL should either be merged with BSNL in whole, or that the wireless division be moved to BSNL.
However, the move could only serve to bring down BSNL with MTNL — whose condition is far worse than that of the bigger company.
For example, even as BSNL was able to report a slight improvement on its bottom line despite the upheaval in the market, MTNL saw a sharp increase in its losses during 2016-17.
MTNL’s losses increased to Rs 2,970 cr from Rs 2,005 cr in the previous year.
More worrying is the debt status of the smaller company. Compared to a debt load of Rs 3,813 cr for BSNL, MTNL had a debt of Rs 15,160 cr as of March 2017.
Servicing such a massive debt load alone will cost about Rs 1,500 cr per year. MTNL’s debt actually increased during 2016-17 from 13,398 cr in the previous year.