In a written reply to Lok Sabha, Milind Deora, Minister of State for Communications and IT said that both Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Nigam Limited (MTNL) are weighed down by high competition and rising costs.

According to Deora, BSNL and MTNL together registered losses to the tune of Rs 129.6 billion in 2011-12 as a result of stiff competition in mobile sector, high staff cost and payment of spectrum charges. In 2011-12, BSNL and MTNL suffered losses of Rs 88.51 billion and Rs 41.09 billion, respectively.

Further, BSNL suffered a loss of Rs 18.23 billion in 2009-10 and Rs 63.84 billion in 2010-11 while MTNL’s losses stood at Rs 26.11 billion in 2009-10 and Rs 28.02 billion in 2010-11.

Deora added the revenues have also decline due to increasing preference of mobile connections over fixed line.  Moreover, staff costs for both the operators are also very high compared to private operators. In case of BSNL, it is around 50 per cent of the revenue and in case of MTNL, it is more than 70 per cent.

He shared that both BSNL and MTNL had paid Rs 185 billion and Rs 110.98 billion respectively as upfront spectrum charges for 3G and broadband wireless access. Deora shared that the market share of the two operators has also declined in the last two years. Market share of BSNL declined from 17.34 per cent on March 31, 2010 to 14.14 per cent as on September 30, 2012. For the same period, MTNL’s market share declined from 14.21 per cent to 10.67 per cent.

As per Deora, BSNL and MTNL, in a bid to meet their expenses, have preferred taking loans instead of selling the land and other assets owned by them. During the last three years, BSNL has taken a loan of Rs 13.2 billion for capex and has paid Rs 0.99 billion as interest on loan.  Meanwhile, MTNL has taken a loan of Rs 112.64 billion and has paid Rs 20.64 billion as interest on loan till October 2012.

However, both the operators have taken a number of steps to improve their financial position. With an aim to strengthen the sales and distribution channel of its mobile services, BSNL has started Project Vijay and also plans to augment capacity by 15 million in phase VII. The operator is also holding weekly meetings with retailers and sales team at district level and to fix and achieve sales targets.

Similarly, MTNL is also in the process of reviewing its tariff for various products and services so as to make them customer friendly and has launched loyalty scheme and special care services targeted at corporate customers.