New Delhi: The Telecom Commission will this week consider suggestions of the Sam Pitroda committee aimed at improving the performance of Bharat Sanchar Nigam Ltd (BSNL).
The state-owned telecom firm has posted declining revenues in the past three years, having ceded its decades-old No. 1 ranking to Bharti Airtel Ltd as mobile phones have transformed the market. BSNL has been unable to capitalize on the surging growth that has made India the second biggest mobile phone market as well as the fastest growing one.
“The schedule for the Telecom Commission meeting has not yet been finalized but should happen within this week,” a Department of Telecommunications (DoT) official said on condition of anonymity as he is not authorized to speak with the media.
The recommendations include changes to the management structure, including splitting the unified post of chairman and managing director, and appointment of professionals in positions reporting directly to the head of the firm on three-year contracts.
Currently, these posts are occupied by company insiders or bureaucrats.
The move will “enhance the quality of senior executives, the management team and the decision-making process to respond to the competitive business environment and the changing market realities,” the Pitroda committee said.
These officials would also have limited stock options or incentives linked to profits, another DoT official said, asking not to be named.
Another suggestions that needs Telecom Commission approval relates to the disinvestment of 30% equity in stages, depending on how well the firm is able to increase its enterprise value after the initial 10% is sold. Half of this stake will be offered to the public and the rest sold to institutional investors.
The Telecom Commission will also consider the creation of a subsidiary for BSNL’s tower-related infrastructure and another subsidiary for its real-estate assets, estimated at 2.5 million sq. m of vacant land in seven major cities. The company is already looking to monetize property that comprises unutilised staff quarters, chairman and managing director Kuldip Goyal told Mint in January.
The government is also looking at creating a BSNL venture fund to acquire appropriate small strategic technology companies.
After reviewing the performance of BSNL at a meeting on 6 January, Prime Minister Manmohan Singh formed a committee headed by Pitroda, with Deepak Parekh and telecom secretary P.J. Thomas as members. The committee submitted its report on 9 February. On 10 March, these suggestions were considered by the BSNL board, which agreed to them in principle and also gave its suggestions to DoT.
The department then decided to forward those recommendations that require policy changes to the Telecom Commission, which is the government’s primary decision-making body for telecom.
Most of the business and operational suggestions are already being implemented by BSNL. The ones that need the approval pertain to board restructuring, divestment and the creation of subsidiaries.
“The recommendations are the right thing for BSNL and the unions should not have a problem with it as it will make BSNL much more viable,” said regulatory expert Mahesh Uppal, a director with consultancy firm Com First India Pvt. Ltd.
BSNL has authorized capital of Rs17,500 crore and paid-up capital of Rs12,500 crore, according to a senior DoT official. The net worth of the company, which offers phone services all over India except in New Delhi and Mumbai, has been estimated at Rs88,634 crore at the end of March 2009, he said.