16-01-2013, 04:39 PM
BSNL: A Financial Overview
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Introduction: -
Telecom landscape in India has changed completely since liberalisation and monopolies in Telecom sector have been replaced with competitive regime (Oligopolies). It is a well-known fact that BSNL was carved out of erstwhile DOT to provide level playing field to private Telecos. Since then many new business firms have entered in the arena and today there is merciless cutthroat competition in this sector. Even though competition is bonanza for subscribers but for corporates it is the question of survivability. If they are not in a position to earn sufficient revenue from the operations which not only meets their growth and expansion plans but are necessary for paying all Government levies and dues as revenue share, spectrum charges, USO fund contribution etc. as well as meeting internal requirements like Operation and Administration expenditures, Staff costs, Interest and repayment of Debt etc. Corporates are also under tremendous pressure from investors to show better results so that they also get handsome returns on their investments in the form of Dividends or appreciation in share values. To meet all such requirements corporate management some time indulges into creative accounting to artificial boost the profit figures because at the end of day it is the profit, which matters most to any business organization if it is not a non-profit organization. There is mandatory requirement for all companies to file following three audited statements to Company Law Board at the closure of every financial years i.e. Balance Sheet as on the last day of financial year, Profit and loss account for the whole accounting year and Cash flow statement. For stake holders and investors it becomes necessary to look beyond the figures quoted in these statements and carry out the in depth financial analysis to take appropriate decision regarding their investment and other important decisions. In respect of BSNL analysis carried out is based on its audited Balance Sheet and Profit and Loss Accounts taken from its annual reports.
Financial Analysis of BSNL:-
On October 1st, 2000, BSNL was formed by converting service providing functions of erstwhile DOT to provide level playing field to private Telecos. Since then BSNL has emerged as the 7th largest Telecom Operating Company in the World. BSNL has played major role in spreading telephones to rural areas of the country at affordable rates. As per TRAI report “5.3 lakh villages have been provided access to telecom network through VPTs covering 87% of the villages. Most of the VPTs have been provided by BSNL. BSNL has provided 13.59 million (July 2005) rural DELs in the country”. By this statement we can judge the important role played by BSNL right from its inception.
Summary
BSNL as a business entity has performed well so far even though there are some disturbing trends also like big increase on staff cost and administrative expenditure. BSNL’s Staff cost is highest among industry barring only to MTNL. While industry average of staff cost is about 4-6 % of AGR same figure for BSNL is more than 25 %. Despite all constrains of the legacy network and large staff overall performance of BSNL is satisfactory. BSNL does not have substantial debt so out go on the part of interest payment is small. BSNL’s performance in Mobile business is average. BSNL started getting more than 10 % of its revenue from this segment at the end of year 2005. More efforts are required on this front. Broadband is other promising area where lot of efforts is required. Marketing of services is not up to the mark and some serious steps needs to be taken in this area because customer acquisition and retention is of prime importance in the highly volatile telecom market place where high churning and low customer loyalty are the characteristics. Despite all this growth in the Telecom sector the digital divide is continuously increasing. Gap between urban tele-density and rural tele-density is widening. Private players are less interested in high investment oriented and low return paying rural India but for BSNL there is a big opportunity here because BSNL already has a large network of more than 36000 Digital Exchanges connected by OFC backbone. BSNL can harp on its existing infrastructure to position itself as formidable player.