Why BSNL failed? BSNL Case study

Venture Mindset

7 Jan 202308:51

Summary

TLDRThe video script discusses the financial struggles of BSNL, a once leading telecommunications company in India. It delves into the company's history, its peak performance in the early 2000s, and the subsequent decline due to various factors such as political interference, technological stagnation, and intense competition post the entry of Reliance Jio. The script also highlights the government's recent relief package for BSNL, aiming to revive its market presence and improve service quality, while questioning the effectiveness of this package in the face of the current competitive landscape.

Takeaways

😀 BSNL, once India's second-largest telecom company, has been in continuous loss since the last 13 years, with total losses exceeding ₹1 lakh crore.
🏆 BSNL was incorporated in 2000 and was the top telecom company in India in terms of revenue in the early 2000s, with over 150 million subscribers at its peak.
📉 The company's downfall began in 2006 with allegations of misuse of influence against the then Telecom Minister, resulting in significant financial losses for BSNL.
📱 BSNL faced challenges in keeping up with technological advancements, notably the delay in launching 3G services, which put it at a disadvantage compared to competitors.
🚫 The government's rejection of BSNL's proposals for new technologies and policies, such as the introduction of WiMAX in 2007, further hindered the company's growth.
📉 The entry of Reliance Jio in 2016 with its disruptive pricing strategy led to massive losses for BSNL and other incumbent telecom companies.
💼 BSNL's decision-making was slow due to its PSU status, which allowed political interference and delayed the company's response to market changes.
💡 The government announced a relief package of ₹1.64 lakh crore for BSNL in July 2022 to improve its balance sheet and service quality.
🔄 Despite the relief package, analysts believe that BSNL faces an uphill battle in reviving its market position against aggressive competition from private players.
🚀 For BSNL to regain its footing, it needs to not only adopt 4G and prepare for 5G but also provide excellent customer service and innovate its offerings.
🔄 The relief package may not provide a significant advantage to BSNL as the telecom industry has become highly competitive post the entry of Jio and other private players.

Q & A

What was the relief package announced by the Union Cabinet for BSNL in July 2022?
-The Union Cabinet announced a relief package of 1.64 lakh crore for BSNL in July 2022.
What has been the financial performance of BSNL since its peak in 2000?
-Since its peak in 2000, BSNL has been continuously facing losses, with a total loss exceeding 1 lakh crore.
What was BSNL's position in the Indian telecom industry in 2000?
-In 2000, BSNL was the second-largest telecom company in India, with over 150 million subscribers.
When was BSNL incorporated, and what was its original purpose?
-BSNL was incorporated in 2000 when the government decided to divide the telecommunications department into two separate companies, one for fixed-line services (BSNL) and one for mobile services (MTNL).
What was the initial advantage BSNL had over its competitors?
-BSNL's initial advantage was its pan-India reach, which its competitors did not have, and its focus on providing proper landline and mobile phone services to the public.
What significant event in 2006 marked the beginning of BSNL's downfall?
-The beginning of BSNL's downfall started in 2006 when Dayanidhi Maran, the then Telecom Minister, was accused of influencing BSNL officials to favor his brother's company, causing a loss of 1500 crore to BSNL.
What technology did BSNL propose to adopt in 2007, and what was the government's response?
-BSNL proposed to adopt WiMAX technology in 2007, which offered 4G speeds. However, the then Telecom Minister, A. Raja, rejected all the proposals.
Why did BSNL face a significant loss in 2010?
-BSNL faced a significant loss in 2010 due to its delayed adoption of new technologies like 3G and slow decision-making processes influenced by political parties.
What impact did the launch of Reliance Jio in 2016 have on BSNL and other telecom companies?
-The launch of Reliance Jio in 2016 disrupted the telecom industry, causing significant losses for BSNL as well as other companies like Idea and Airtel, due to its competitive pricing and offerings.
What challenges does BSNL face in reviving its market position after the relief package?
-BSNL faces challenges such as intense competition in the telecom industry, the need to adopt 4G and 5G technologies, and the requirement to improve customer service and infrastructure.
What are the expectations from the relief package for BSNL's future?
-The expectations from the relief package are that it will help BSNL improve its balance sheet, enhance service quality, and provide better competition to top companies like Airtel and Reliance in the coming years.

Outlines

00:00

📉 The Downfall of BSNL: From Profit to Loss

The script discusses the financial decline of BSNL, a once-leading telecommunications company in India. It highlights the announcement by the Union Cabinet in July 2022 of a relief package worth 1.64 lakh crore for the company, which has been incurring losses for 13 years, with a total loss exceeding 1 lakh crore. The script delves into BSNL's history, starting as a telegraph service in 1850 and evolving into a telecommunications company in 2000. It mentions BSNL's peak performance in 2000 with over 150 million subscribers but points out its failure to adapt to new technologies and market changes, leading to a continuous loss since 2008. The script also touches on the corruption allegations against the then-Telecom Minister Dayanidhi Maran in 2006 and the subsequent impact on BSNL's revenue and trust among customers.

05:01

🚀 The Impact of Reliance Jio on the Telecommunications Industry

This paragraph focuses on the entry of Reliance Jio in 2016 and its disruptive effect on the telecommunications industry, particularly on BSNL. With Jio offering 1 GB data for as low as 50 paise, it led to a significant shift in the market dynamics, causing substantial losses for established players like BSNL, Airtel, and Idea. While Airtel and Idea managed to adapt by changing their policies, BSNL struggled to keep up with the changes and lost many subscribers. The script also mentions the financial losses reported by BSNL in 2016-17 and 2017-18, amounting to 4800 crore and 8000 crore, respectively. It raises questions about why the government did not intervene to help BSNL despite its PSU status and the company's significant losses. The paragraph concludes with the announcement of a relief package for BSNL by the government, aiming to improve its balance sheet and service quality, and the challenges BSNL faces in reviving its position in the market dominated by competitors like Airtel and Jio.

Mindmap

Keywords

💡Reliance Jio

Reliance Jio is an Indian telecommunications company that revolutionized the Indian market with its launch in 2016. It introduced extremely affordable data plans, which disrupted the industry and led to significant losses for established players like BSNL. In the video, Jio's impact on the market and BSNL's inability to keep up with its offerings are discussed.

💡BSNL (Bharat Sanchar Nigam Limited)

BSNL is the second-largest telecommunication company in India, which has faced a series of financial losses and challenges over the years. The script highlights BSNL's decline from being a leading telecom company to struggling with continuous losses, which is central to the video's theme of the changing landscape of the telecom industry in India.

💡Telecom Industry

The telecom industry refers to the sector of the economy that is involved in the provision of telecommunication services. The video script discusses the evolution of this industry in India, focusing on the challenges faced by BSNL and the competitive dynamics introduced by new entrants like Reliance Jio.

💡Losses

The term 'losses' in the script refers to the financial losses incurred by BSNL over the years, which have been substantial enough to affect its operations and market position. The video explores the reasons behind these losses and their implications for the company's future.

💡Revival Package

A revival package is a set of financial and operational measures intended to help a struggling company recover. The script mentions a ₹1.64 lakh crore package announced by the Indian government for BSNL, aiming to improve its financial health and service quality.

💡4G Technology

4G technology refers to the fourth generation of mobile telecommunications, offering faster data speeds and improved performance compared to previous generations. The video script discusses the delay in BSNL's adoption of 4G technology, which has put it at a disadvantage in the competitive telecom market.

💡5G

5G is the fifth generation of mobile networks, which promises even faster data speeds and lower latency than 4G. The script touches on the readiness of Indian telecom players for the launch of 5G services, contrasting this with BSNL's struggles to even establish its 4G presence.

💡Competition

Competition in the script refers to the intense rivalry among telecom companies in India, particularly after the entry of Reliance Jio. The video highlights how this competition has exacerbated BSNL's challenges and forced other companies to adapt quickly to stay relevant.

💡Policy Changes

Policy changes refer to modifications in the rules and regulations governing a sector or industry. The video script discusses the need for BSNL to adapt to new policies and regulations in the rapidly evolving telecom industry to remain competitive.

💡Infrastructure

Infrastructure in the context of the video refers to the physical structures and networks necessary for providing telecommunication services. BSNL's investment in its infrastructure is mentioned as a factor that once contributed to its success but also as a burden that it has struggled to maintain in the face of financial difficulties.

💡Market Share

Market share is the portion of the total market for a particular product or service that is controlled by a company. The script discusses how BSNL has lost significant market share due to the competitive pressures from other telecom companies, particularly after the launch of Reliance Jio.

Highlights

In July 2022, the Union Cabinet announced a relief package of 1.64 lakh crore for BSNL, a company that has been in continuous loss for the past 13 years.

BSNL's total loss is more than 1 lakh crore, and it is well known to parents as India's second telecom company.

BSNL was the second largest telecom company in India with over 150 million subscribers at its peak.

BSNL made its last profit in 2008-9 and has been facing losses ever since.

BSNL is one of India's oldest communication service providers, starting in 1850 as a telegraph service.

The government divided the telecommunications department into two separate companies in 2000, one of which was BSNL.

BSNL had a significant advantage as a PSU, focusing on providing proper landline and mobile services to people.

BSNL's services were initially cheaper than competitors like Airtel, gaining customer trust and market share.

BSNL had a pan-India reach, unlike other competitors, and invested heavily in infrastructure and broadband services.

BSNL faced its first major downfall in 2006 due to allegations of misuse of influence involving the telecom minister at the time.

BSNL suffered a loss of 1500 crore due to the cancellation of 323 connections by the then telecom minister.

BSNL's revenue dropped significantly from 3600 crore to 1200 crore, affecting its market position.

In 2007, BSNL proposed to bring in WiMAX technology, which was rejected by the telecom minister, increasing competition.

BSNL was slow to adopt new technologies like 3G, giving competitors an advantage and leading to a decline in subscribers.

BSNL's decision-making was delayed due to its PSU status, with political interference affecting its operations.

Reliance Jio's entry in 2016 with affordable data plans disrupted the telecom industry, affecting BSNL and other companies.

BSNL reported losses of 4800 crore in 2016-17, which increased to 8000 crore in 2017-18.

The government announced a relief package for BSNL to improve its balance sheet and service quality.

Analysts question whether the relief package will be enough for BSNL to compete in the current telecom market.

BSNL needs to adopt 4G and 5G technologies and improve customer service to regain its position in the market.