BSNL : A sustainable profit Turn or Just a Paper Mirage?
Bharat Sanchar Nigam Limited (BSNL) has reported a profit after 18 years—a feat that almost sounds miraculous. In Q3 FY25 (October–December 2024), the company posted a net profit of ₹262 crore, followed by ₹280 crore in Q4 FY25 (January–March 2025). This achievement is notable given that BSNL had been consistently posting losses since 2007. For FY25, total losses dropped by 58% to ₹2,247 crore, compared to ₹5,370 crore the previous year. Operating revenue rose by 7.8% to ₹20,841 crore, and EBITDA jumped from ₹2,164 crore to ₹5,396 crore, reflecting a margin of 23.01%. But the crucial question remains: is this a sustainable profit, or just clever accounting? Let’s dig deeper into the story.
The Strategy Behind the Profit: Sustainable or Superficial?
Three major strategies underpin BSNL’s return to profit—strategies that look impressive on paper but raise doubts about their long-term viability.
Employee Costs: BSNL moved ₹1,042 crore of employee wages from operational expenses to “Capital Work-in-Progress” (CWIP). This lowered its reported costs and boosted net profit. However, auditor VK Jindal flagged this move as improper, noting the lack of concrete documentation. This seems more like a temporary fix than a step towards sustainable profit.
Asset Sales: BSNL earned ₹1,120 crore by selling land and buildings—a 77% jump from last year. While it gave a big push to the bottom line, asset monetization is a one-time event and not a recurring revenue source, casting doubt on sustainable profit prospects.
Change in Spectrum Cost Accounting: The company switched to unit-based amortization of spectrum costs, which slashed ₹1,186 crore from expenses—on paper. While it helps polish the numbers, it doesn’t reflect core operational improvements and raises concerns about the durability of such profits.
Auditor Red Flags: Credibility of Profit in Question
Multiple red flags raised by auditors question the authenticity and durability of BSNL’s reported profit.
1. Disputed CWIP Entries
Auditor VK Jindal criticized the move to classify ₹1,031.5 crore in employee expenses under CWIP, citing lack of justification. This undermines the notion of sustainable profit and hints at financial manipulation.
2. Pension Fund Shortfalls
BSNL faces a shortfall of ₹501.5 crore in pension liabilities and ₹82.2 crore for leave encashment. These gaps could pose future financial risks—further threatening the idea of sustainable profit.
3. Lack of Transparency in Government Funding
The government provided ₹3,018 crore in support, but ₹1,880 crore remains unexplained. Auditors found the company’s “pending invoices” explanation inadequate, pointing to transparency issues—an obstacle to sustainable profit.
Core Business Performance: Still a Weak Link
Despite accounting gains, BSNL’s core operations continue to struggle.
Customer Exodus: According to TRAI data, BSNL lost 6.69 lakh subscribers between January and March 2024 and another 8 lakh in December 2024, while adding only 3 lakh new users. Growing the customer base is crucial for sustainable profit, but BSNL is lagging.
Flat Revenue from Key Services: Income from mobile and broadband services has remained stagnant. Telecom expert Parag Kar commented, “This profit stems from asset sales and accounting maneuvers—not real business performance.” Sustainable profit depends on healthy core operations, which BSNL currently lacks.
Decline in Enterprise Segment: Revenue from the B2B segment, once a major income driver, declined by 1.4% to ₹5,090 crore. This further undermines the foundation for sustainable profit.
The Road Ahead: Challenges to Sustainable Profit
Several hurdles stand in the way of BSNL’s path to lasting profitability.
1. Depreciation Pressure
BSNL has installed 93,450 towers for its 4G and 5G rollout. The massive capital expenditure will lead to significant depreciation in future quarters, likely pressuring profits. The company itself acknowledged that “profit may dip in upcoming quarters.”
2. Dependence on Government Support
BSNL has received rescue packages worth ₹69,000 crore in 2019, ₹1.64 lakh crore in 2022, and ₹89,047 crore in 2023. This reliance on government aid is not a sign of a self-reliant entity and contradicts the idea of sustainable profit.
3. Struggle to Earn Customer Trust
BSNL’s 4G rollout is slow, and its 5G services are still on the horizon. Meanwhile, private players like Jio and Airtel are well ahead in the 5G game. To achieve sustainable profit, BSNL must significantly improve customer experience and expand its subscriber base.
BSNL and Government Stand by Their Strategy
BSNL Justification: BSNL claims that classifying employee costs under CWIP is standard industry practice. CMD Robert J. Ravi stated, “Our focus is on customer satisfaction and affordable services. Profit is not the goal, but a by-product of excellence.” However, this does not guarantee sustainable profit.
Government View: The telecom ministry treats asset sales as part of its “asset monetization” plan. It asserts that with 4G and 5G expansion, BSNL will soon rival private telecom operators. But this vision hinges entirely on achieving sustainable profit through real business performance.
BSNL Future: A Long Road to Sustainability
While BSNL’s return to profit is praiseworthy, the road to sustainable profit is long and full of challenges. Faster 4G/5G deployment, regaining customer trust, and strengthening core business revenue are essential. The current profit, driven by asset sales and accounting tricks, is unlikely to last. To truly transform, BSNL must become self-sufficient and competitive in the open market.
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