The government has announced the merger of BSNL and MTNL. The merger is being touted as a revival plan as well.
Here is why it will not work.
1) Let’s take the case of Bharti Airtel. In 2018-2019, the total revenue from operations for the company stood at Rs 53,663 crore. Of this, the employee benefits expense or the money that the company spent on its employees stood at Rs 1,720 crore or 3.2 percent of the total revenue of the company.
The employee cost is so low primarily because Airtel has over the years turned itself into a services company. The entire infrastructure that any telecom company requires to deliver its network has been outsourced to other companies.
How does BSNL (the bigger of the two companies being merged) fair on this front? Let’s take a look at Table 1, which provides the details.
Table 1 makes for very interesting reading. The revenue earned by BSNL has collapsed over the years, whereas it’s salary bill has more or less remained the same. In 2018-2019, the salaries of its employees amounted to 75 percent of its revenue.
The salary bill of Bharti Airtel during the same period was 3.2 percent. Even after this the company barely made a profit of Rs 792 crore on revenues of Rs 53,663 crore, meaning a profit margin of around 1.5 percent.
2) The question is how is the merged entity of BSNL going to compete? In the press release accompanying the decision of the merger, the government talks about offering a voluntary retirement scheme for employees over the age of 50.
Here is why it will not work.
1) Let’s take the case of Bharti Airtel. In 2018-2019, the total revenue from operations for the company stood at Rs 53,663 crore. Of this, the employee benefits expense or the money that the company spent on its employees stood at Rs 1,720 crore or 3.2 percent of the total revenue of the company.
The employee cost is so low primarily because Airtel has over the years turned itself into a services company. The entire infrastructure that any telecom company requires to deliver its network has been outsourced to other companies.
How does BSNL (the bigger of the two companies being merged) fair on this front? Let’s take a look at Table 1, which provides the details.
Table 1 makes for very interesting reading. The revenue earned by BSNL has collapsed over the years, whereas it’s salary bill has more or less remained the same. In 2018-2019, the salaries of its employees amounted to 75 percent of its revenue.
The salary bill of Bharti Airtel during the same period was 3.2 percent. Even after this the company barely made a profit of Rs 792 crore on revenues of Rs 53,663 crore, meaning a profit margin of around 1.5 percent.
2) The question is how is the merged entity of BSNL going to compete? In the press release accompanying the decision of the merger, the government talks about offering a voluntary retirement scheme for employees over the age of 50.
