Why only Air India? Haven't our PSU telecom companies fallen from grace?

Written by: Sunil Fernandes

Why only AI? Haven't our PSU telecom companies fallen?
As an increasing number of obits keep being written about Air India, one is compelled to draw parallels with two other PSU telecom companies that are slowly going the same way – BSNL and MTNL.

Consider this: In 2005-2006, public sector undertaking, BSNL reported a net profit of a staggering Rs 10,000 crore. In 2010-2011, the net loss figure was Rs 6000 crore, which is expected to rise even further once figures for 2011-2012 are revealed. This may be a tad lower than Air India's likely (estimated) losses of around Rs 7000 crores for 2011-2012.

In 1992, Mahanagar Telephone Nigam Ltd (MTNL), another PSU telecom company, which had a virtual telecom services monopoly in Delhi and Mumbai, was trading at around Rs 370 per share on the bourses. Exactly 20 years later, when a stock would have multiplied manifold, MTNL is trading at a pittance of Rs 25.

The reason of course is mounting losses which for 2011-2012, is slightly more than Rs 4000 crores.

The losses of two telecom PSU majors MTNL and BSNL together are significantly higher than the losses of Air India. But, the media is awash with news only on Air India, with a lot of debate over whether the airline should be shut. The reason of course maybe because of the total accumulated losses of Air India, which are staggering, rather than losses for a single year.

However, if the same concerns of mounting losses applies to BSNL and MTNL then in the next few years, we could have a clarion call to close down both these PSU telecom companies, since their accumulated losses too may scale unsustainable levels.

MTNL and BSNL have a problem with inefficiencies, which prevents them from competing in a competitive environment. It's a strange paradox, however, that most of the leading private telecom players are making profits.

There is a dire need to restructure the two PSU telecom companies along with Air India, as otherwise, their accumulated losses and debts could reach the levels Air India presently has.

When it comes to closing a business, it would be easy to shut a government owned telecom company, rather than the national carrier, which commands pride and prestige for Indians.


Read more about: air india, mtnl, bsnl
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