Telecom woes: BSNL expects normalcy in liquidity position by Sept quarter

The BSNL management is making all efforts to ease liquidity pressure being faced by the company, and expects normalcy in liquidity position to be restored by the September quarter, according to a senior official of the crisis-ridden PSU.

BSNL Director - Finance, S K Gupta has shot off a letter to all Chief General Managers of telecom circles, flagging the "fiercest ever competition" being faced by the telecom sector and said "predatory tariff offerings by the competitors" has triggered a sharp decline in revenue from services.

"The BSNL management is making all out efforts to ease the pressure on liquidity. It is expected that in near future, the liquidity position of the company will start improving," Gupta said in the letter dated May 16.

He asserted that normalcy in liquidity position is expected to be restored by the next quarter.

BSNL has been able to sustain its customer base, despite the persistent pressure of competition on its revenue.

"The telecom sector being capital intensive, wherein even to remain in business 'or' to ensure business sustainability, the service providers are required to invest in newer technologies at frequent intervals, as technologies evolve at very fast pace," the letter said.

The cumulative effect of these factors have resulted in liquidity crunch, Gupta added.

The letter assumes significance as distressed telecom PSUs Mahanagar Telephone Nigam Ltd (MTNL) and Bharat Sanchar Nigam Ltd (BSNL) are saddled with massive debt and have faced problems in clearing staff salaries in the recent past.

The government is in the process of working out a rescue plan for MTNL and BSNL in form of a revival package that entails components like Voluntary Retirement Scheme, asset monetisation, and allocation of 4G spectrum.

Overall, the telecom sector has been battered by falling tariffs, eroding profitability, and towering debt, in the face of stiff competition triggered by disruptive offerings of Reliance Jio, owned by richest Indian Mukesh Ambani.

The relentless tariff war that ensued after Jio's entry into the telecom sector with free voice calls and SMS, bundled with cheap data has led to pressure on margins of even private operators that have scrambled to match the competition.