Opinion | Why BSNL May Lose Its Dominance In Rural Areas Because Of VRS

The government-owned Bharat Sanchar Nigam Ltd’s (BSNL) voluntary retirement scheme (VRS) is moving towards a great success. As per the latest report, more than 70,000 employees have already opted for it. The number is expected to go up in the last few days. December 3 is the deadline for applying for VRS.

Let us assume that nearly 75,000 leave the company through VRS scheme. It will have a significant impact on the financials of the company as more than 70% of its revenue goes towards salary of the employees. This is very high compared to its private competitors. For example, only five per cent of Bharti Airtel’s revenue goes towards salary.

The company is expected to save about Rs 7,000 crore per annum, if about 75,000 employees take VRS. However, the big question is whether it will be enough to revive the ailing PSU.

"Once the VRS process is complete we will have to do a proper analysis. BSNL is very efficient in Southern and Western states. As per our initial information, number of employees taking VRS from these regions are much higher. If this remains till last, it will be difficult for the management to restructure remaining manpower and there may be an impact in the working of the PSU,” said a senior official of the department of telecommunications (DoT).

Currently, BSNL’s advantage is that it is strong in rural areas compared to its competitors. However, one of the reasons for it is that it has a number of employees even in remote areas where private players don’t have network. However, this advantage may go away as BSNL looks to reduce its manpower by more than 50 per cent.

When BSNL launched its services, its USP was that its services were available in rural areas. For many years, it was the only network that was available in remote areas.

Later, private players started providing services in remote areas. However, their penetration was limited to certain areas. That is the reason that BSNL was the first choice for customers outside metros and big cities. Now, with reducing manpower, BSNL’s advantage will go away.

BSNL is strong in fixed-line services. It has nationwide network of Optical Fibre cable (OFC). It differentiates BSNL from its competitors. In fact, if BSNL had concentrated only on fixed-line services, it would have been a great source of revenue and combined with Wifi network, BSNL could have been much ahead of its competitors.

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However, it requires a lot of manpower to maintain landline network. Now, it will be a challenge for BSNL to maintain its fixed-line services. It may be noted that fixed-line services always have higher average revenue per user (ARPU) than mobile services.

Reducing manpower is good for BSNL as it will reduce financial burden on it. However, if it is not handled properly, it may have negative impact on it in the long term.

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