BSNL board has not approved VRS plan: Kuldeep Goyal
13 Mar 2010, 0200 hrs IST, Joji Thomas Philip, ET Bureau
	
Erstwhile state monopoly BSNL's decline as a telecom service provider has few parallels in history. It slipped behind its fleet-footed private  sector rivals to lose market share and revenues at an alarming speed. BSNL chairman and managing director Kuldeep Goyal is spearheading an effort to reverse the decline in fortunes by emulating private telcos. The company is set to dump its equipment procurement process to adopt the ‘managed capacity’ model where network is outsourced to vendors, which constantly changes network configuration to meet capacity requirements. Mr Goyal explains in detail how he will script a turnaround for BSNL, which is expected to post the first annual loss in its history, in an exclusive interaction. Excerpts: 

Now that BSNL’s board has cancelled its controversial 93-million lines tender, what is the wayforward? 
We are changing our procurement strategy completely. We are looking at a ‘managed capacity’ model and this will be based on the traffic which is measured on a per Erlang basis. Our future orders for equipment will no longer be based on number of GSM lines. The new strategy will see us work out our mobile network capacity requirements on a quarterly basis and vendors will be given contracts to install this. This is the model being followed by private operators. We are now studying how companies like Airte lare executing it. 

Will the new model do away with all the controversies associated with BSNL tenders? 
Now, vendors will design our network — first they will study our networks, find out which of the clusters have capacity constraints and then identify the equipment that is required to be added. So, if there is surplus equipment in a cluster, they would like to roll it over to another area. For the first time, designing, planning, implementation of our mobile networks will be done by the vendor. Right now, our employees do all these functions. So far, we were giving blanket orders to install certain number of lines at a particular location/town — here what happens is that in some places, the capacity gets used up faster than our estimates and we then have constraints. On the other hand, in other places, the growth in mobile connections may be lower than our calculations, leaving us with surplus capacity. We were giving orders for say a 12-month period, and could not make changes in between. In a managed capacity model, capacity is added or reduced every quarter. 

How will your new tenders be? How will you address your equipment needs during this period? 
There is a lot of speculation that BSNL has already run out of mobile capacity in most parts of the country. Also, even if you have spare capacity now, will it not run out by the timeyouimplementthenewmodel? 
Yes, the new tenders will no longer be about lines. Once we study this model and understand it, we will float RFPs for equipment purchase under the managed capacity model. Currently, we have a capacity of around 20 million GSM lines which are under installation in the South zone. These lines are being provided by Huawei, while in the West, they are being supplied by Alcatel Lucent. There is also come capacity left in the North and East zones. We have 8.5 million free lines in the South, 7.7 million in the West and 1.5 million each in the North and East. We have some some margins in our existing orders that we have placed with these vendors and therefore may be able to place additional orders with them. In the west and south zones, we will not require additional capacity for the next one year. In the North and East, we will require additional capacity within the next six months and we are considering several options to meet it. We are yet to decide if we want to place additional orders under phase V of our 2007 tenders. 

The government has banned you from procuring equipment from Chinese firms in most regions of the country. Does this impact BSNL? 
I cannot comment on government decisions, but if any rules are there they should be common for all the operators. They cannot be applicable only to state-owned companies as that does not serve the purpose. If security is a concern, it should be for all the networks of all operators. 

Your financials have been falling rapidly. The Prime Minister’s Office as well as the Department of Telecom have expressed concerns over this. 
BSNL is not making losses. Even in the last fiscal, we had profits of around Rs 575 crore. This year, we are going to take a massive hit of around Rs 4,800 crore because of a salary revision. This salary revision is effective from 2007. These arrears have to be paid in the current fiscal. We have already disbursed around Rs 1,000 crore as of last year, so there will be an additional liability of Rs 3,800 crore this fiscal. This year’s financials will, therefore, be impacted. In the next year, the situation will improve. This is a temporary phase. In the case of mobile revenues, BSNL is doing better than private operators. The mobile revenues for the industry have come down by 5-6% in the current fiscal in the quarter ending June 2009, industry revenues were down by 4.55% while in the quarter ended September it was down by 1 %. But our revenues from mobile services have not fallen. Overall revenues have fallen because of our wireline revenues. 

Is it possible that for the first time, BSNL will register losses this fiscal? 
This year, that is a possibility. This is because of this new liability of having to pay three-year salary arrears due to the revision. 

Was the board pressurised into accepting Pitroda panel report? 
There was no pressure on us. The board has given its views on this report to the government and has asked it to take a final call on it. Most recommendations of this panel are related to the growth of the company and the board has no objections to it. While the Pirtoda panel recommended a 30% divestment, the board has only said that it is okay with a stake sale. We have not said that 30% should be sold, but rather have asked the government to work out the exact quantum. On the issue of VRS, the BSNL board is of the view that 60,000 people will retire in the next five years. So, the headcount will come down by this number within a five-year period. Let me also clarify, the board has not approved any move to offer VRS to 100,000 employees. The BSNL board also agrees with the Pitroda committee report that private talent be brought in and marked linked salaries be offered to these executives.