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BSNL faces Rs2,000 cr revenue drop on falling fixed lines, usage

BSNL faces Rs2,000 cr revenue drop on falling fixed lines, usage

New Delhi: Bharat Sanchar Nigam Ltd (BSNL), one of the biggest non-oil state-owned companies in the country, could report an up to Rs2,000 crore drop in revenues this fiscal year, more than four times the decline it reported last year on account of dwindling fixed-line phone base and per user mobile phone revenues.

The reduction in revenues is equivalent to 5.7% of the Rs34,616.21 crore sales BSNL recorded in fiscal 2007.

BSNL, which competes with aggressive private sector rivals such as Bharti Airtel Ltd and Reliance Communications Ltd, has already seen a drop of Rs1,300 crore for three quarters this financial year, according to a senior company executive, who did not want to be named because he is not authorized by the firm to give media interviews.

“The nine months’ revenues are around Rs24,869 crore, down from around Rs26,177 crore last year for the same period," he added. The 2007-08 figures are unaudited.

Another senior BSNL executive, who also preferred to stay anonymous, confirmed a reduction in the firm’s revenues but declined details.

Yogesh Kirve, who tracks the telecom sector for Mumbai-based Anand Rathi Securities Ltd, said BSNL’s income from sources other than its core business of providing phone services has been increasing over the past few years.

“In (fiscal) 2006, BSNL’s revenue from other income was Rs4,600 crore, which increased to Rs5,200 crore last year," he said. “Their biggest concern is that the traffic is moving to mobile from fixed lines."

Meanwhile, rising costs in supporting its fixed-line phone business are expected to impact the company’s profitability as well.

“Our expenditure has gone up from Rs23,531 crore (in the April-December period) last year to around Rs24,108 crore," in the same months this year, the first BSNL official said, adding it was early to access the full impact on net profits for fiscal 2008. BSNL reported around Rs7,805 crore in net profits last year.

BSNL, which counts four of five fixed-line phones in the country on its network, started witnessing a decline in its fixed-line business after March 2006, when it had almost 37.5 million users.

By January 2008, the company had only around 31.6 million fixed-line customers.

In February this year, a BSNL executive had told Mint that the company would discontinue expansion of its fixed-line phone business for rural customers if the government decides to pull back around Rs2,000 crore subsidies currently handed to the state-owned firm for running some 12 million phones (or nearly 38% of BSNL’s customer base) in villages.

“We are already incurring around Rs8,400 crore in operating expenses towards maintaining our rural landline business; we will have no option but to exit the non-profitable businesses we are currently in," a BSNL executive had said, requesting anonymity.

Companies such as Bharti Airtel have contributed a total of Rs12,774 crore since 2003 towards what the government calls access deficit charge, which in turn is used to fund expansion of BSNL’s rural phone network.

Last year, BSNL received around Rs2,000 crore from the government.

However, BSNL says the help is not enough.

Under tariffs mandated by the Telecom Regulatory Authority of India, the BSNL executive in the February interview had said, a phone firm was allowed to charge just Rs50 a month as rent for a fixed-line phone in villages, where operating costs work out at around Rs870 each.

“We make revenues of Rs190 on each rural fixed-line (including call charges), which is not at all sufficient," he had said.

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