Professional Documents
Culture Documents
Volume 5, Issue 4, July – August 2018, pp. 481–495, Article ID: JOM_05_04_051
Available online at
http://www.iaeme.com/JOM/issues.asp?JType=JOM&VType=5&IType=4
Journal Impact Factor (2016): 2.4352 (Calculated by GISI) www.jifactor.com
ISSN Print: 2347-3940 and ISSN Online: 2347-3959
© IAEME Publication
B. Rajaram
Research Scholar, Department of Commerce, Telangana University, Nizamabad, T.S
ABSTRACT
Bharat Sanchar Nigam Limited took over the business of providing of telecom
services and network management from the erstwhile Central Government
Departments of Telecom Services (DTS) and Telecom Operations (DTO), with effect
from 1st October‘2000. It is one of the largest and leading public sector units
providing comprehensive range of telecom services in the entire India except New
Delhi and Mumbai. BSNL is the only service provider, making focused efforts and
planned initiatives to bridge the rural-urban digital divide in ICT sector. The present
study is focused mainly to assess the operating performance of BSNL in terms of total
income, operational income, total expenses, employee benefit expenses,
administrative, operating and other expenses, profit before tax, tax expenses and
profit after tax. The operational revenue from sale of services of BSNL in initial years
2007-08 and 2008-09 is highest and from the 2008-09 onwards it has been declining
year after year up to 2012-13 and started increasing slowly from 2013-14 onwards.
The revenue from basic segment has been declining year after year, whereas the
revenue from cellular segment and broadband segment increasing. The operating
expenses of the BSNL has been increasing year after year from 2007-08 and the
major operating expenses are employee benefit expenses and administrative,
operating and other expenses. The EBIDT is highest in the initial years of study 2007-
08, 2008-09 and then after it has been declining year after and become negative in the
year 2013-14. From the year 2014-15 the EBIDT become positive and increasing.
Keywords: Basic, Cellular, Broadband, Leased Line.
Cite this Article: Prof. M. Yadagiri and B. Rajaram, Analysis of Operating
Performance of BSNL. Journal of Management, 5(4), 2018, pp. 481–495.
http://www.iaeme.com/JOM/issues.asp?JType=JOM&VType=5&IType=4
1. INTRODUCTION
Operating performance refers measuring performance of a firm against standard or prescribed
indicators effectiveness and efficiency such as total profit, operating profit, profit before tax
etc. The operational income generated by BSNL only from the basic operations of sale of
telecom services such as Telephones other than Wireless in Local Loop, Cellular, Wireless in
Local Loop, Broadband services, Leased lines, Leased income from passive infrastructure,
Interconnection usage charges (IUC) from other service providers, Other Services and other
operating income which includes income from construction contracts, income from sale to
third party sales from telecom factories , Profit from manufacturing activities of telecom
factories etc., excluding the other incomes during the financial year.
2. REVIEW OF LITERATURE
Paul (2011) has mentioned that Bharat Sanchar Nigam Limited would be subjected to extra
financial liabilities like license fees, corporate tax, dividend payment, etc which were not
possible to erstwhile DOT.
Varadharajan Sridhar (2011) highlights the unique cost structure, tariff regulation, and
universal service obligations of basic telecom services. It dwells upon the different stages of
spectrum allocation and management, including third generation and broadband wireless
services. The trade-off between competition and industry efficiency due to limited spectrum
availability and fragmentation is well emphasized.
Dr. Kanchan Bhatia and Prof Prashanth Jain (2012) concluded that the performance
appraisal system helps to increase organizational effectiveness as appraisal encourages high
level of performance , identifies employees with potential , rewarding performance equitably
and determined employees need for development. These all activities support organisational
strategic orientation and achieve organizational effectiveness. In private sector the principle
measure of successful performance is profit. Public agencies, on the other hand, have no such
universal and widely accepted performance measures of success. However, performance is
judged against the goals their programmes and weathers the desired results and outcomes
have been achieved.
R.C.Upadhyaya & Vashundhra Sharma (2012) in their Research Article on ‗A
Comparative Study of the Telecommunication Service Providers BSNL and Airtel Operating
in Gwalior Division India‖ concluded that after analyzing the performance, they found that
the Wireless services provided by the Airtel are more satisfactory than the services provided
by the BSNL. The performances in case of Wire line and Broadband services are almost
similar in both the companies and there is need to improve the performance of BSNL in case
Wireless services.
Dr.M.Dhanabhakyam & Swapna Kurian (2012) in their Research Article ―Profitability
Analysis of Bharath Sanchar Nigam Limited (Bsnl)‖ calculated the Net Profit Ratio, Return
On Assets Ratio, Return On Equity, Earning Per Share and Cash Profit Ratio from the year
2001-02 to 2010-11 and concluded that the profitability ratios shows fluctuating trends except
last two years and the last two years ratios shows negative values except cash profit ratios.
N.Swapna (2012) in her Research Article ―Telecommunication Sector in India – An
Analysis‖ concluded that the telecom industry in India has witnessed a phenomenal and
manifold growth over the recent years. In the country, personalized telecom access has
become an essential necessity of life for a growing number of people. The telecom sector in
India holds unlimited potential talking of future growth. In the nation, both Public as well as
private firms are vigorously enhancing their technologies in a venture to take the telecom
industry in the country to a much higher development.
3. METHODOLOGY
The analysis of operating performance has made an attempt to assess the operating
performance of the BSNL on the basis of revenue sources and various types of operating
expenses for the period of ten years commenced from 2007-08 to 2016-17. The relevant data
collected from various issues of BSNL annual reports.
The Table -1 presents the data related to revenue generation of BSNL by sale of various
types of its services for the period of ten years commenced from 2007-08 to 2016-17.
vii. Other Services: The services include telegraph and telex, its revenue contribution
is very negligible. Its revenue contributions is only Rs.1, 13,400 lakhs in the year
2007-08 and Rs.1, 48,725 lakhs in the year 2008-09. Then after there was
continuous decline from year to year and became zero in the year 2016-17.
viii. Income from Passive Infrastructure: The income from passive infrastructure
includes charges for sharing of building space, Electricity and miscellaneous
charges, tower sharing charges and charges for duet sharing. In the early years of
study period its revenue contribution was zero up to the year 2010-11.From the
year 2011-12 onwards, its revenue contribution is slowly increased year after year
and moved from 0.19 per cent in the year 2011-12 to 1.86 per cent in the year
2016-17.
The total revenue from sale of services was highest at Rs.32, 32,812 lakhs in the year
2007-08. Then after the revenue from sale of services slowly declined with a growth rate of -
12.94 to -0.08 during the period from 2008-09 to 2012-13. In the year 2013-14 the revenue
from sale of services abnormally increased by 5.87 per cent when compared with its
preceding year 2012-13. In the year 2014-15 its growth rate was 1.57 per cent but it was
suddenly declined to 0.64 per cent in 2015-16. In the year 2016-17 the growth rate of revenue
from sale of services is noticed at 1.43 per cent compared with the 2015-16. Therefore it can
be concluded that there was no clear cut trend emerged in the revenue form sale services
during the period under review.
segment contributed 33.38 per cent of the total revenue. This upward trend continued
up to 2016-17 with 44.36 per cent. Based on this trend, it can be said that the cellular
segment revenue will be overcome the revenue of the basic segment of BSNL total
revenue.
iii. Broadband segment Revenue: The Internet in India began with the launch of the
Educational Research Network (ERNET) in 1986. The first publicly available internet
service in India was launched by state-owned Videsh Sanchar Nigam Limited
(VSNL) on 14 August 1995. The network was only made available to educational and
research communities. ERNET was initiated by the Department of Electronics (DoE),
with funding support from the Government of India and United Nations Development
Program (UNDP), involving eight premier institutions as participating agencies—
NCST Bombay, Indian Institute of Science, five Indian Institutes of Technology at
Delhi, Mumbai, Kanpur, Kharagpur and Chennai, and the DoE in New Delhi. ERNET
began as a multi-protocol network with both the TCP/IP and the OSI-IP protocol
stacks running over the leased-line portion of the backbone. In the initial period up to
2010-11 the revenue from broadband was included in the basic segment. From 2011-
12 onwards revenue generated from broadband has been shown as a separate segment.
It is noticed that the total revenue generated from broadband segment in the year
2011-12 is Rs.3, 59,368 lakhs and it has been increased year after year and reached to
Rs.5,40,482 lakhs in the year 2016-17. Thus the revenue from broadband segment
was moved from 12.21 per cent to 17.14 per cent from 2011-12 to 2016-17. As per
the internet usage data from the BSNL, it can be forecasted that the significance of
this segment will be increased in the near future.
iv. Un-Allocated Segment Revenue: The different types of miscellaneous revenues which
were not included in any of the above three segments are shown separately under un-
allocated segment. This segment contributes insignificant amount in the total revenue
of BSNL. The data reveals that only Rs.2, 104 lakhs of revenue generated from this
segment in the year 2008-09. It was drastically declined to Rs.242 lakhs in the year
2011-12. However there was an abnormal increased of Rs.5,332 lakhs in the year
2012-13, Rs.9,142 lakhs in the year 2014-15 and Rs.1,68,100 lakhs in the year 2016-
17.The total revenue of the BSNL declined by 5.33 per cent in the year 2008-09 and
7.80 per cent in the year 2009-10 when compared with its preceding years. The
declined growth rates were registered at 1.63 per cent, 3.70 per cent, and 2.19 per cent
in the year 2010-11, 2011-12 and 2012-13 respectively. The positive growth rates
were identified at 1.94 per cent, 1.28 per cent and 5.18 per cent in the years 2013-14,
2014-15 and 2015-16 respectively. Whereas only 0.86 growth was identified in the
year 2016-17 compared with 2015-16. Therefore it can be concluded that the revenue
generation capacity of BSNL has been in increasing trend year after year from 2013-
14 onwards.
per cent in the year 2009-10. Again in the year 2011-12 it represents 9.64 per cent and
gradually declined year after year and reached to 6.36 per cent in the year 2016-17.
ii. In case of finance cost includes interest expenses on financial liabilities at amortised
cost such as subscribers deposits, loan, unwinding of discount on decommissioning
liabilities and others represents 2.56 per cent in the year 2007-08. This cost was
declined from year to year and reached at only 0.4 per cent in the year 2016-17. It is
noticed that employee benefit expenses represents the highest percentage of total
expenses followed by administrative, operating & other expenses, non-cash expenses,
licence and spectrum fee and finance cost in the entire period of study.
iii. The growth rate of total expenses is identified at 2.13 per cent in the year 2008-09
when compared with its preceding year 2007-08. The growth rate was declined by
0.80 per cent in the year 2009-10.Whearas the growth of total expenses registered at
5.64 per cent in the year 2010-11. Then after the negative growth rate -4.61 per cent
was identified again in the year 2012-13. In the year 2013-14 total expenses are
almost similar to total expenses of 2012-13. Again in the year 2014-15 the growth rate
of total expenses are highest at 6.76 per cent. By introducing various controlling
measures internally the growth rate of total expenses declined to -1.47 per cent and -
1.13 per cent in the year 2015-16 and 2016-17 respectively. Based on fluctuations of
total expenses year to year it can be concluded that there is no clear cut trend was
emerged in the growth rate of total expenses of BSNL.
4.4. Analysis of EBITDA, Tax expenses and Profit After Tax of BSNL
The operating performance of the BSNL is measured accurately in general by analysing its
Earnings before Interest, Tax expenses, Depreciation and Amortization. Thus it is aimed to
analyse the following aspects
i. Earnings before Interest, Tax, Depreciation and Amortization (EBITDA): It is a
measure of a company‘s operating performance. Essentially, it‘s a way to evaluate
a company‘s performance without having to factor in financing decisions,
accounting decisions or tax environments. EBIDTA allows analysts to focus on
the outcome of operating decisions while the impacts of non-operating decisions
like interest expenses a financing decision, tax rates a governmental decision, or
large non-cash items like depreciation and amortization an accounting decision.
By minimising the non-operating effects that are unique to each company,
EBITDA allows investors to focus on operating profitability as a singular measure
of performance. Such analysis is particularly important when comparing similar
companies across a single industry, or companies operating in different tax
brackets. EBITDA is calculated by adding back the non-cash expenses of
depreciation and amortization to a firm‘s operating income.
ii. Profit Before Tax: The Net profit margin is indicative of management‘s ability to
operate the business with sufficient success not only to recover from revenues of
the period, the cost of services, the expenses of operating the business including
the depreciation and the cost of the borrowed funds, but also to leave a margin of
reasonable compensation to the owners for providing their capital at risk.
iii. Tax Expenses: A tax expense is a liability owed to federal, state/provincial and
municipal governments within a given period. Tax expenses are calculated by
multiplying the appropriate tax rate of an individual or business by the income
received or generated before taxes, after factoring in such variables as non-
deductible items, tax assets, and tax liabilities. Tax expense affects a company‘s
net earnings given that it is a liability that must be paid to a federal or state
provision has been made in respect of the period when only 30 per cent of the profits would
be tax free assuming that only 70 per cent of the timing differences would reverse. The BSNL
has not recognised any deferred tax asset during the year following the notified Accounting
Standard 22 ―Accounting for taxes on income‘, only reversal relating to deferred tax assets
and deferred tax liability created during the earlier years have been made. The Table – 4
presents the data of EBIDT, Tax Expense and Profit After Tax.
Table 4 Analysis of EBIDT, Tax Expense and Profit After Tax (Rs.in Lakhs)
Earnings Before Tax Expenses/
Interest Profit After
Year Interest, Depreciation Depreciation Deferred Tax
Expenses Tax
and Tax Benefit
1501019 86254 969610 144216 300939
2007-08
(-) (-) (-) (-) (-)
1023829 44325 852341 69678 57485
2008-09
(-31.79) (-48.61) (-12.09) (-51.68) (-80.90)
735092 35161 919679 37483* -182265
2009-10
(-28.20) (-20.67) (7.90) (-153.79) (-417.07)
353648 38986 972543 19455* -638426
2010-11
(-51.89) (10.88) (5.75) (-48.10) (-250.27)
53751 18412 917432 2977 -885070
2011-12
(-84.80) (-5 2.77) (-5.67) (115.30) (38.63)
73254 35147 833643 7092* -788444
2012-13
(36.28) (90.89) (-9.13) (-338.23) (-10.92)
-88138 21964 602317 10443* -701976
2013-14
(-220.32) (-37.51) (-27.75) (47.25) (-10.97)
47527 50189 881680 60933* -823409
2014-15
(153.92) (128.51) (46.38) (483.48) (17.30)
350919 54339 713511 28939* -387992
2015-16
(638.36) (8.27) (-19.07) (-52.51) (-52.88)
169117 14679 633042 0 -479321
2016-17
(-51.81) (-72.99) (-11.28) (-100) (23.54)
2009-10. Then after in the year 2011-12, it was declined by 52.77 per cent, that in the
year 2012-13 it was abnormally increased by 90.89 per cent. In the year 2014-15 and
2015-16 the interest expenses were increased by 128.51 per cent and 8.27 per cent
respectively. But in the year 2016-17 the interest expenses declined by 72.99 per cent.
Though there was no clear cut trend in the interest expenses, we can say that the
company has taken necessary measures to minimise the interest expenses during the
period of the study.
iii. The total depreciation charged by the BSNL in the year 2007-08 was Rs.9, 69,610
lakhs. But it was declined by 12.09 per cent in the year 2008-09. Then there was a
slight increase in the year 2009-10 and 2010-11 by 7.90 per cent and 7.57 per cent
respectively. Then after there was a continuous decline up to the year 2013-14.
Whereas in the year 2014-15 the depreciation charged by the company was increased
by 46.38 per cent. Again there was a slight decline continuously in the year 2015-16
and 2016-17.
iv. The company has paid tax expenses only in the year 2007-08, 2008-09 and 2011-12
with an amount of Rs.1, 44,216 lakhs, Rs.69, 678 lakhs and Rs.2,977 lakhs. In the left
over years the BSNL has received the deferred tax benefit because of deferred tax
assets are recognised and carry forward to the extent there is a virtual certainty that
such deferred tax assets can be realised.
v. As EBIDT declined year after year the profit after tax also declined year after year.
The company has registered profit after tax only in the first two years i.e., 2007-08
and 2008-09 with an amount of Rs.3, 00,939 lakhs and Rs.57, 485 lakhs, except these
two years in every year the profit after tax is negative.
5. CONCLUSIONS
The following are the broad conclusions drawn from the study:
i. It can be concluded that the revenue from sale of telephone services declining year
after year and the number of basic telephone connections greatly affected by
cellular phone connections .There was a clear cut increasing trend emerged in
cellular services revenue during the period under study. A continuous fall in
number of WLL connections noticed from the year 2010-11 onwards due to
introduction of GSM. An increasing trend is observed in revenue generation from
the broadband services during the entire period of study. With regard to the
revenue of leased lines there is an increasing trend. It can be concluded that there
was no clear cut trend emerged in the revenue form sale services during the period
under review.
ii. It is also observed that the basic segment revenue declined from 66.62 per cent to
33.17 per cent during the study period. The cellular segment revenue will be
overcome the revenue of the basic segment of BSNL total revenue. The revenue
from broadband segment was moved from 12.21 per cent to 17.14 per cent from
2011-12 to 2016-17. As per the internet usage data from the BSNL, it can be
forecasted that the significance of this segment will be increased in the near
future. It can be concluded that the revenue generation capacity of BSNL has been
in increasing trend year after year from 2013-14 onwards.
iii. It is noticed that employee benefit expenses represents the highest percentage of
total expenses followed by administrative, operating & other expenses, non-cash
expenses, licence and spectrum fee and finance cost in the entire period of study.
Based on fluctuations of total expenses year to year it can be concluded that there
is no clear cut trend was emerged in the growth rate of total expenses of BSNL.
iv. The BSNL has paid tax expenses only in the year 2007-08, 2008-09 and 2011-12
and in the left over years it has received the deferred tax benefit because of
deferred tax assets are recognised and carry forward to the extent there is a virtual
certainty that such deferred tax assets can be realised.
REFERENCES
[1] Paul J (2011), International business, PHI Learning Private Limited, New Delhi.
[2] Varadharajan, Sridhar (2011), The Telecom Revolution in India: Technology, Regulation
and Policy, Publisher; Oxford University Press.
[3] Dr. Kanchan Bhatia and Prof Prashanth Jain (2012) ―A study of Performance appraisal
and organizational effectiveness in terms of individual and organizational basis. A
comparative study of BSNL and AIRTEL‖ International Journal on Arts, Management
and Humanities 1(1): pp.63-72.
[4] R.C.Upadhyaya and Vashundhara Sharma (December-2012) ―A Comparative Study of
Telecommunication Service providers BSNL and AIRTEL Operating in Gwalior Division
India ―International Journal of Business Management & Research (IJBMR), Vol. 2 Issue
4, pp. 13-20.
[5] Dr.M.Dhanabhakyam and Swapna Kurian (March-2012) ―Profitability Analysis of
Bharath Sanchar Nigam Limited (Bsnl)‖ Indian Journal of Applied Research,
Ahmedabad,Volume:1,Issue:6 ISSN-2249-555X
[6] N. Swapna (7-8th April-2012) MPGI National Multi Conference 2012 ―Advancement in
Electronics & Telecommunication Engineering‖ International Journal of Computer
Applications® (IJCA) ISSN: 0975 – 8887.
[7] Chhaya P.Patel and Smt.K.K.Patel (April-2014) ―Study on Performance Appraisal
System in BSNL‖ VSRD International Journal of Business and Management Research,
Vol. IV, Issue IV.
[8] Dr.Papori Baruah and Rashmi Baruah (November-2014) ―Telecom Sector in India: Past,
Present and Future‖ International Journal of Humanities & Social Science Studies
(IJHSSS) ISSN: 2349-6959, Volume-I, Issue-III, Page No. 147-156, Scholar Publications,
Karimganj, Assam, India.
[9] Ms.Pritish and Dr.Taruna Saxena (Oct-2015) ―An Analysis of the Indian Telecom
Industry‖ IOSR Journal of Business and Management (IOSR-JBM), Volume 17, Issue
10.Ver.II, PP 35-42.
[10] Anush Gupta(April-2015) ―Financial Performance Evaluation of Telecommunication
with special reference to BSNL‖ SSRG-International Journal of Humanities and Social
Science, ISSN:2394-2703.
[11] RNCOS, Mobile Industry Research( Tuesday, 22nd January-2008) ‖Rural India New
Playground for Mobile Industry Players‖
[12] Corporate Catalyst India(August-2013) ―A brief Report on Telecom Sector in India‖
[13] Telecom Regulatory Authority of India‘s Study Paper on Shareholding Pattern, Financing
Pattern and Capital Structure of Indian Private Telecom Access Service Providers 8th
September, 2016.
[14] Telecom Regulatory Authority of India ―A Twenty year of Odyssey 1997-2017‖ Report
prepared by National Institute of Public Finance and Policy, New Delhi-110067.
[15] Economic Survey 2016-17 Vol2, Chapter -08 – Industry and Infrastructure, Telecom
sector, P. No.207-209.
[16] IBEF, Telecommunications-December-2017.www.ibef.org
[17] Department of Telecommunications, Achievements of telecom sector in financial year
2016-17.
[18] Department of Telecommunications, Progress during the last three years (2014-17).
[19] Nishith Desai Associates, The Indian Telecom Sector – Legal and Regulatory
Framework, July 2014.
[20] TRAI Annual Reports 2007-08 to 2016-17.
[21] Deloitte & Aegis, Broadband The lifeline of Digital India, November 2014.
[22] DoT, Annual Reports 2007-08 to 2016-17.
[23] BSNL, Annual Reports 2007-08 to 2016-17.
WEBSITES
[24] www.bsnl.co.in
[25] www.dot.gov.in
[26] www.trai.gov.in
[27] www.deloitte.com/in
[28] www.icra.in
[29] www.pwc.in
[30] www.ijar.in