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BSNL Journey in Telecommunication Industry and

Learnings from NTT Group

Rahul Prajapat, Deepa More & Lalit Lalwani

To cite this article: Rahul Prajapat, Deepa More & Lalit Lalwani (2015): BSNL Journey in
Telecommunication Industry and Learnings from NTT Group, IETE Technical Review, DOI:
10.1080/02564602.2015.1104523

To link to this article: http://dx.doi.org/10.1080/02564602.2015.1104523

Published online: 17 Nov 2015.

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 IETE TECHNICAL REVIEW, 2015
http://dx.doi.org/10.1080/02564602.2015.1104523

BSNL Journey in Telecommunication Industry and Learnings from NTT Group1

Rahul Prajapata, Deepa Moreb and Lalit Lalwanib
a
Department of Electrical Engineering, IIT Bombay, Mumbai, India; bShailesh J. Mehta School of Management, IIT Bombay, Mumbai, India

ABSTRACT KEYWORDS
Bharat Sanchar Nigam Limited (BSNL), despite being a government organization and having Competitiveness;
maximum infrastructure facilities, has not been able to achieve commercial heights in disinvestment; enterprise
telecommunication industry. We attempt to find the root causes behind this and arrive at certain sustainability;
recommendations for BSNL. We have benchmarked BSNL with similar players globally and in the privatization;
Telecommunication
domestic market. We have chosen Nippon Telegraph and Telephone Corporation (NTT) of Japan for
detailed benchmarking which having started out similarly as a government enterprise, continues to
this day with the Japanese government as majority stakeholder. NTT is recognized as a leading
company in the world telecommunication industry has been able to demonstrate sustained growth
in the face of domestic as well as international players like Softbank Telecom, KDDI, EMOBILE and
Downloaded by [rahul Prajapat] at 02:48 02 April 2016

AT&T, Deutsche Telekom, China Mobile. We have studied NTT’s journey in detail and have drawn
learnings for BSNL.

1. Introduction Public sector units (PSUs) in general are facing chal-

Telecom is a growing industry globally as well as within
India. Technological competitiveness [1] and commercial
savvy-ness is essential for growth and economic sustain-
ability especially in a dynamic industry like telecom. A
number of domestic players offering telecom services have
tied up with international counterparts for technological
support and are wooing the Indian customer with attrac-
tive offerings. With rapid advancements in telecom tech-
nology, appropriate tie-ups with international players with
requisite knowhow can build technological competitive-
ness [1] and become a differentiator for Firms of Indian
Origin especially since in-house research and development
(R&D) efforts are still modest in the domain. Prominent
amongst the Indian players are Bharti Airtel having tie-up
with Siemens AG, IDEA having tie-up with AT&T, Tata
Teleservices having tie-up with NTT Docomo.
However, telecom firms BSNL (Bharat Sanchar Nigam
Limited) and MTNL (Maharashtra Telecom Nigam Lim-
ited) stand unique in this scenario being government
enterprises, enjoying government backing and with
infrastructure facilities spread out in the far reaches of
the country. These too have tie-ups with international
counterparts for technological expertise (ZTE of China,
dimension data of Africa), however despite these advan-
tages; both BSNL and MTNL have not been able to
achieve commercial success.
lenges in the era of globalization, liberalization, and pri-
vatization. At the same time, PSUs play a vital role in
economic and social progress of developing countries by
ensuring economic goods and services reach to the far-
thest corners of the country. Both the PSU firms were
carved out of India’s Department of Telecom, MTNL in
1985 and BSNL in the year 2000 [2] to achieve egalitar-
ian growth across all segments of society. Further to this,
and with advent of liberalization in the country, the
Indian telecom industry seemed set for exponential
growth in times since then.
Private players like Bharti Airtel, IDEA Cellular, Reliance
Communications, and Tata Teleservices have been able to
capitalize on this opportunity and shown significant com-
mercial growth mounting pressure on the PSUs. Particular
amongst them is Bharti Airtel (Table 1), whose net sales
for year 2014 were Rs 499,185 million almost double that
of BSNL for the same year. This is especially interesting in
the scenario that the sales figures for year 2004 (Table 1)
were miniscule bordering towards non-existent for Bharti
Airtel when both BSNL and MTNL enjoyed dominant
positions in the domestic telecom market. It shows that
the Indian PSUs have not been competitive enough as
compared to private players in the domestic market.
We analyse that competitiveness is an important factor
to measure economic success and sustainability of a

1
All the authors have contributed equally to this paper.
© 2015 IETE
 2 R. PRAJAPAT ET AL.

Table 1: Benchmarking of BSNL with competitors in India

Financial year 2004 2006 2008 2010 2012 2014

Net sales in Rs Mn
BSNL 31,577.2 377,538.9 327,420.4 279,762.4 260,602.7 262,549.1
MTNL 64,223.3 55,713.1 47,309.9 365,98.3 33,927.8 34,710.4
Bharti Airtel Ltd. 291.7 112,314.7 257,035.1 356,095 416,038 499,185
Tata Teleservices 7936 25,748 52,652.4 63,848.3 99,727.9 104,520
IDEA Cellular Ltd. 11,655.2 20,070.7 67,199.9 118,502.4 192,753.2 261,104
Reliance Comm. Ltd. 41.9 147,951.3 135,575.2 121,380 124,100
Vodafone India Ltd. 309,000 341,000 375,320 449,870
Profits in Rs Mn
BSNL 59,765.3 89,396.9 30,093.9 ¡182,26.5 ¡88,507 ¡70,197.6
MTNL 3.7 20,120.8 62,441.9 94,262 57,300 66,002
Bharti Airtel Ltd. ¡2069.1 1256 10,443.6 10,536.6 5765.4 16,893.1
Tata Teleservices 11,504.7 5803 5868.9 ¡26,109.7 ¡41,097.8 78,251.3
IDEA Cellular Ltd. ¡7864 ¡18,782.1 ¡18,137.6 ¡13,336.8 ¡42,282.8 ¡61,664.9
Reliance Comm. Ltd. 0 56.5 25,864.5 4789.3 1560 ¡7800
Vodafone India Ltd. 1276.2 3720.5 3653.3 2503.2 ¡4441 ¡1149
Net Forex Rs Mn
BSNL ¡68 ¡9645.6 ¡2789.5 ¡10,941.4 ¡1800.5 ¡2303.4
MTNL ¡8.4 55.9 32.6 19 21.6 43
Bharti Airtel Ltd. ¡6.9 ¡10,667.7 ¡50,282.5 ¡17,526 ¡15,995 ¡11,213
Tata Teleservices ¡4887.4 ¡14,617.7 ¡12,396 ¡50,383.9 ¡10,696.1 ¡5016.4
IDEA Cellular Ltd. ¡1877 ¡2695.8 ¡15,552.3 ¡20,286.6 ¡13,911.4 ¡15,031.7
Reliance Comm. Ltd. 0 0 ¡40,427.4 ¡42,70.3 ¡4968.1 ¡4950.1
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Vodafone India Ltd. ¡2650.2 ¡2037.5 ¡4050 ¡4679

TCI (Net Forex/Total Forex transactions)
BSNL ¡0.95 ¡0.82 ¡0.51 ¡0.73 ¡0.46 ¡0.78
MTNL ¡0.37 0.50 0.32 0.25 0.23 0.33
Bharti Airtel Ltd. ¡1 ¡0.29 ¡0.62 ¡0.33 ¡0.28 ¡0.14
Tata Teleservices ¡1 ¡1 ¡1 ¡1 ¡1 ¡0.93
IDEA Cellular Ltd. ¡0.71 ¡0.66 ¡0.91 ¡0.93 ¡0.80 ¡0.66
Reliance Comm. Ltd. 0 0 ¡0.61 ¡0.20 ¡0.20 ¡0.16
Vodafone India Ltd. ¡0.45 ¡0.55 ¡0.77 ¡0.55

Note: On 11 February 2007, Vodafone acquired Hutch Essar.

Source: CMIE database.

company or an organization. When we look at the Japa-
nese telecom firm NTT (Nippon Telegraph and Tele-
phone Corporation), set-up as a government enterprise
in 1952 with similar motives as those of BSNL, we see
that NTT has been able to sustain its growth in the face
of tough competition from private players, in the domes-
tic space like Softbank Telecom, KDDI, EMOBILE and
has grown further to become a leading player in the
global market too amongst companies AT&T, Deutsche
Telekom, China Mobile, British Telecom (BT) (53rd as
per Fortune Global 500, 2014 list and NTT Financial
Report, 2012). Additionally, NTT has been measuring up
to challenge posed by climate change by making con-
certed efforts to reducing impact of its operations both at
the service provider level and customer end user level via
greener operations and through provision of cloud serv-
ices employing concept of shared resources (company
website and annual report 2014).
NTT thus, stands as an example of sustainable enterprise
from competitiveness point of view [3] while being
responsible towards the natural environment. Whether
we could have learnings for BSNL from the journey of
NTT which started out similarly as a government
enterprise and is featured today as amongst the leading
global telecom companies, is what motivated us to
undertake this study. What path did NTT take, what
decisions it had to make and how it overcame challenges
that arose out of those choices and whether BSNL could
attempt a similar turnaround are some of the questions
that we will try to address via this paper. We now pro-
ceed to literature survey in this regard.
2. Literature review and objective
Competitiveness of a firm is the ability to produce
right goods and services of good quality at the right
price, at the right time, meeting customer’s needs
more efficiently and more effectively than other firms
[3,4]. “Technological competitiveness is defined as the
collective technological capability needed to be com-
petitive, namely for a nation or a company to main-
tain survival and sustainable growth” [5]. Empirical
studies by [6] have proved that acquisition and devel-
opment of technology enhances competitiveness, and
firms that are not equipped with sound technology
and R&D initiatives may not be able to compete in
the long run in an open economy.

As observed in Table 1, Indian PSUs in telecom sector,
BSNL and MTNL are losing their technological competi-
tiveness [1,4,7] to private players. Most telecom compa-
nies in India have modest to nil spending in R&D; with
the government enterprises, the picture is even more dis-
mal. Technology tie-ups with international counterparts
are the route often taken by telecom players active in the
domestic market.
Critical success factors in improving national technologi-
cal competitiveness may reside in the competitiveness
process of nurturing emerging industries [8], particularly
creating enabling environment, collaborative advantages,
strong commercialization capabilities, infrastructure cre-
ation, mass awareness, attract global resources through
alliances, and investing in emerging technologies [9].For
leapfrogging in technology capability, arrival of new
techno-economic paradigm can serve as a pull factor
[10]. The Sam Pitroda committee [11] suggested various
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turnaround strategies for BSNL, such as disinvestment,
restructuring, repositioning, and privatization.
Privatization of telecom industry presents some of the
most difficult issues faced in microeconomic policymak-
ing. Privatization concept has been scrutinized by many
authors. In [12], the author has highlighted the process
and outcomes of privatization in telecom sectors.
Furthermore, the fact that most successful firms in the
Indian telecom space are private entities and NTT too
had to undertake the privatization route to recover itself
from challenges it faced similar to BSNL forces us to
examine privatization and its effect on the Indian tele-
com firm BSNL in more detail. We try to understand the
effect of liberalization and privatization on telecom PSU
BSNL and path available to it in order to continue to
exist and flourish as an equal player in the domestic and
international spaces while providing communication
services to all sections of the masses.
In [13], the author has highlighted about privatization
and deregulation policy in Japan. Success of NTT privati-
zation [14] involves various sub elements, such as
detailed regulation, flow of information, incentives, and
pragmatic approaches. Our attempt in this paper is to
examine how to recover a flagging telecom PSU and put
it on path of enterprise sustainability quite similar to the
journey traced by the Japanese company NTT.
Tracing NTT’s history, “NTT was established as a
monopoly government owned corporation in 1952 and
was privatized in 1985 to encourage competition in the
telecom market” (NTT annual reports). The purpose of
IETE TECHNICAL REVIEW 3
the company as defined by the NTT Law, in addition to
ownership of company, is to ensure proper and stable
provision of telecommunications services all over Japan,
including remote rural areas as well as to conduct
research relating to the telecommunications technologies
that will form the foundation for telecommunications
[15]. The Japanese government continues to own
roughly one-third of its shares making it a unique publi-
cally listed company with majority holding by the gov-
ernment. NTT has been undergoing organizational and
structural changes to continuously align itself with the
demands of the knowledge economy and invests sub-
stantially in R&D to provide products and services for
large corporations worldwide [16,17]. The parent com-
pany NTT has six subsidiaries. Ranked 29th in the For-
tune Global 500 list (2012), NTT stood as the number
one telecommunication company in the world with
US$130C Bn as total revenues of which US$11.6 Bn
came from overseas. NTT then had operations in 69
countries with 80% of Fortune Global 100 companies as
its clients and 10,000C enterprise clients outside Japan
(Financial Report, 2012).
As listed on its annual report, NTT has been awarded
with “Thomson Reuter’s top 100 global innovators” for
the past three continuous years (2012 2014 as per com-
pany website). This award is given to top 100 companies
all over the world. NTT is only a communication com-
pany in this list. Exactly how did NTT achieve this turn-
around continuing with the Japanese government as its
majority shareholder warrants close examination. Fur-
thermore, Japan is famous for its work culture ethics and
innovative methodologies. This makes NTT’s case fur-
ther stronger and encourages us to engage ourselves into
studying Japan’s culture by taking up NTT case study.
Having established basis for selection of NTT for study
in context of, we now move on to root cause analysis of
BSNL loss of competitiveness. Objective, design of study,
and brief outline of sections is explained below.
The key objective of this paper is to find the root cause
for BSNL’s loss in market position in telecom industry.
A sub-objective is to analyse critical success factors of
NTT group and trace its journey from government
enterprise to being the leading telecom company in the
world and derive learnings for BSNL. This is covered in
Section 2. Benchmarking of BSNL with domestic telecom
players and international players is covered in Section 3.
While benchmarking with prominent international play-
ers has been done just to provide a macro view; detailed
benchmarking of BSNL is done with NTT. Section 4 cov-
ers root cause analysis done to arrive at major cause of
 4 R. PRAJAPAT ET AL.

the problem as well as critical analysis is done about vari-

ous aspects of the Indian telecom industry in general.
Sections 5 and 6 discuss about critical success factors of
NTT and the best suitable ones in the context of BSNL
are identified. Finally, privatization aspects of NTT are
discussed at length and the most relevant ones are
presented.

3. Problem statement, quick benchmarking, and

root cause analysis
3.1. Quick benchmarking
Quick benchmarking is a tool to compare a company/ Figure 1: Access service provider-wise market shares in the wire-
organization with its competitors based on various finan- less subscribers.
cial parameters. Table 2 gives quick benchmarking of Source: TRAI Report, 2014.
NTT with its peers in the telecom industry worldwide.
We see that while most firms tabulated have comparable time shows very poor revenues and profits which have
employee strengths, AT&T is slightly ahead of NTT in gone negative in 2010 (refer Table 2).
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terms of revenue as well as profit. While AT&T started in

1983 as a private company, NTT was set-up in 1952 as a
government enterprise and later divested in 1985 with
majority of its stock (one third) held with government.
Indian telecom PSU BSNL’s revenues are almost 20 to
30 times less than that of AT&T or NTT. On closer
examination of BSNL and NTT, it is interesting to note
that customer segment of BSNL (91 million) is almost
one and half times higher than that of NTT’s (63 million);
as given in respective company annual reports (2014).
BSNL thus presents a grim picture when compared with
its international counterparts; especially given that both
started out as comparable firms in the initial days.
We observe that most companies are comparable on
basis of employee strength, only exception being BT.
However, the revenues and profit share shows vast varia-
tion with companies AT&T, NTT, and China Mobile
showing higher profits in multiples of the others in
the sample. The employee productivity (given as ratio of
Sales Revenue/No. of employees) shows much higher
values for AT&T, China Mobile, Deutsche Telekom, and
NTT. BSNL on both counts fares very poorly. It is sad-
dled with a large employee workforce while at the same
Observing NTT with its peers (refer Table 2), in terms of
ownership pattern, while AT&T does not have govern-
ment intervention in ownership, China Mobile is entirely
owned by the government. Deutsche Telekom is compa-
rable with NTT in government holding pattern; however
it has not demonstrated superior performance like NTT.
BSNL’s position on its home turf is also dismal (Table 1),
its revenues have been stagnating, costs have been esca-
lating and the firm has recorded huge losses since 2010.
With a market share that has dropped to less than 10%
(9.47%), it is ranked fifth after private firms Bharti Airtel
(22.78%), Vodafone (18.66%), IDEA Cellular (15.34%)
(see Figure 1).
Trend data (2004 2014) show that BSNL was the lead-
ing firm in the country in early 2000s and started degrad-
ing in performance (decreasing revenues) since 2006. If
we look at employee strengths of BSNL and other players
in domestic space, we observe that BSNL has as much as
25 times more employee strength as compared to other
players like Airtel with half their revenues. This suggests
extremely low employee productivity (given as revenue/
employee) for BSNL.

Table 2: Benchmarking of BSNL with international firms

Revenue Profit Profitability profit/ Number of Employee productivity Government Customer
Companies ($Bn) ($Bn) revenue (%) employees ('000 $/ employee) Patents share (%) base (Mn)

AT&T 128.8 34.8 27.02 243,620 528.69 >10,000 0 116.6

NTT 92.03 10.2 11.11 246,000 374.11 2857 33 63
China Mobile 100.97 19.5 19.33 197,030 512.46 1047 100 806.6
Deutsche Telekom 68.44 1.3 2.01 230,000 297.57 148 32 0.4
British Telecom 28.16 3.4 12.07 87,800 122.43 4300 0 7.1
BSNL 4.81 1.1 23.28 252,492 19.05 0 100 91

Source: Annual reports (Year: 2013 2014) of respective companies.


All this data comparison shows that BSNL in spite of
having full governmental support in terms of funding
and infrastructure; has not been able to sustain in the
domestic market and neither has it been able to grab
opportunity to go global. Meanwhile, starting out as a
government undertaking in 1952, NTT has been
doing exceptionally well in all business segments that
it is in. We now move on to detailed benchmarking
of BSNL and for that we have chosen NTT as it fits
the criteria of being almost an identical counterpart
to BSNL.
We attempt to answer the following questions.
(1) Although with majority government holding, how
does NTT continue to sustain its growth and
become the leading telecom company in the face of
global private players like AT&T and Verizon?
(2) What path did NTT take, what decisions it had to
make and how it overcame challenges that arose
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out of those choices?
(3) What are the core capabilities of the NTT group?
(4) Can we learn lessons for Indian companies (BSNL
especially) in the telecom leadership?
(5) Are there any other systemic changes which may
have drifted BSNL away from its growth?
3.2. Root cause analysis
Detailed root cause analysis (Figure 2) has helped us to
find the exact cause behind deterioration of BSNL’s
Figure 2: Detailed root cause analysis.
IETE TECHNICAL REVIEW 5
health. While commercial non-performance and increas-
ing costs appear as the apparent causes for economic
deterioration of firm and build-up of “financial burden”,
there emerge other systemic issues, such as lack of tech-
nology, lack of skilled workforce leading to lower morale
and “poor overall human resource management”, poor
marketing of services leading to lower customer connect
leading to “losing customer segment” and “government’s
own slow response to building capacity” of own firms in
the telecom industry to tackle onslaught of private play-
ers capturing its market share. Although being part of a
very technology intensive industry, BSNL has done little
to build its technological competitiveness, there is hardly
any in-house R&D and the firm has not a single patent
to its credit, it has poor employee connect, its services
are not communicated to existing customers nor are
they actively marketed to prospective ones, the current
organization set-up does not allow flexibility or agility
necessary for quick decision-making to respond to
changes in technology and market spaces further
compromising its ability for economic success. All these
point towards a key cause and that is “Lack of Dynamic
Leadership” at the top. For this to be addressed, major
overhaul would be necessary in the organization struc-
ture and ownership pattern of the firm.
4. Findings
Analysing Tables 1 and 2 and company history from
annual reports, in 2004 BSNL (IBEF [India Brand Equity
 6 R. PRAJAPAT ET AL.
Foundation] website) and NTT [18] enjoyed a 60% mar-
ket share in the telecom services market (wired lines) in
Indian and Japanese market, respectively. In addition to
wired lines, NTT also had presence in the wireless seg-
ment with a market share in excess of 60%. In 2014, in
the face of stiff competition from private players, NTT
continues to hold majority market share (50%) whereas
BSNL’s market share in domestic market is reduced to
9.47% (as per telecom statistics released by TRAI, 2014).
The longitudinal trends in detailed benchmarking
(Table 1), hint at BSNL being ahead of competitors in
domestic space in 2004. However, from 2007 onwards it
steadily started losing its market share to private players,
such as Bharti Airtel, IDEA Cellular, Reliance Communi-
cations, and Vodafone who entered Indian telecom mar-
ket post liberalization (in 1992).
Technological Trade Competitiveness Index (TTCI) is a
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ratio of net forex to total forex transaction [4]. TTCI
takes values between C1 and 1, values closer to C1
indicating net exports and higher trade competitiveness
and those closer to 1 indicating net imports and lower
trade competitiveness.
TTCI of BSNL has been hovering closer to negative end
(» 0.76 to 0.78 range) showing poor technological
competitiveness. On the other hand, TTCI figures show
better numbers for Bharti Airtel and Reliance indicating
these companies are better positioned in terms of tech-
nological competitiveness amongst the rest.
5. Discussion
We are discussing fall from prominent position and emi-
nent threat to economic sustainability of government
enterprise BSNL in face of competition from private
players in the domestic telecom space.
Prior to liberalization in 1991, the Indian government
has been having its presence in almost all industries
banking, insurance, heavy metals, mining, petroleum,
petrochemicals, fertilizers, and many more. Post liberal-
ization, some industries, such as steel, banking, insur-
ance, etc., have shown the capability to withstand
competition from private players. While this may be true
for a few firms, there are many which have not been able
to withstand competition from private players, a particu-
lar case is that of BSNL (and MTNL) from the telecom
sector.
It is often said that government’s business is to do gover-
nance and regulation of industries and not actively
participate in the industry as players. However, some-
times it becomes necessary for government to have active
presence as a player in industry when private companies
create monopoly with ensuing risk of price hikes or in
instances when private players may find it unviable to
provide goods and services to remote locations, quite
similar to case of telecom.
In doing so, the government enterprises have to invest in
infrastructure in remote locations irrespective of eco-
nomic viability of returns achieved from serving those
regions. Government enterprises often have large organi-
zational structures making decision-making a lengthy
process and time consuming. In a technology intensive
and dynamic industry, such as telecom, players need to
be agile to respond to changes in technology and market
conditions. They need to invest in in-house R&D or
have technology tie-ups to stay ahead or current with the
times. Commercial success is of utmost importance with
all players trying various combinations of schemes to
woo customers. Here too, it is interesting to note that
although BSNL tariff rates are quite competitive and at
times lowest in the market, same has not translated into
it being the preferred service provider and achieving
commercial success. While other players in the market
actively promote their services and continuously engage
their customers, BSNL has a very low recall with its cus-
tomers and does not engage with customers beyond
mandatory updates on availability of service. On discus-
sion with internal team at BSNL, the common thread
found was that BSNL has not been able to engage/con-
nect with its own employees and ground staff too either.
Employees themselves seem less aware of the recent
schemes on offer whether on wired or wireless commu-
nication services. There seems to be a severe disconnect
with the customer and employees.
There appears a serious lack in focussed marketing to
target customers on part of BSNL directly affecting its
revenue streams. Sharing of existing infrastructure could
provide additional source of revenues however this too
suffers from poor perception of its assets by potential
customers.
Loss of market share and, steady drop in revenues, low
(to negative) profitability, excessive workforce and
inability to capitalize on existing infrastructure are symp-
tomatic of deeper issues being faced by the government
enterprise. Non-viability of BSNL now appears as a
major cause of concern and has been actively up for dis-
cussion in recent times (online news reports in ET and
FirstPost, September November 2014). When as a
result of tough competition from private players,

government undertakings are not able to defend their
market share and threaten to become a drain to the
exchequer, in those cases divestment or privatization is
the oft suggested route.
Issues faced by BSNL are indicative of indecision or deci-
sions not in pace with changes in the technology and
market space. Whether these issues would be addressed
by divestment or privatization and in what format needs
some deliberation.
Divestment (offering partial ownership) or privatization
(offering full ownership) could take different forms, e.g.
trading majority ownership via “strategic sales” (single
buyer) or via “open market sales” (open to public at
large) to infuse capital and also bring in professional
expertise. Open market sales route is followed when a
private firm is poised to grow and is looking to generate
funds through the equity route by getting its shares pub-
Downloaded by [rahul Prajapat] at 02:48 02 April 2016
lically listed for going “public”.
Strategic sales are usually done when buyer brings in new
technology or expertise and exerts sound governance
inputs into the firm and helps bring in operational effi-
ciency and as such is more suited to BSNL case. However,
this route is easier said than done, most of the PSU firms
are giant monoliths in terms of employee strengths
(400,000C in case of BSNL alone) with strong trade
unions enjoying support from other such unions across
the country which could prove to be challenge to address
to satisfaction of concerned constituencies. There is the
huge telecom infrastructure spread in remote areas that
may lie unused in case the acquiring private company
finds it unviable and chooses not to serve those areas,
compromising availability of telecom facilities to people
located there. It clearly shows that there is more to privat-
ization of government held companies than meets the eye.
We observe in [19] that BSNL’s Japanese counterpart, i.e.
NTT was also in the similar situation back in 1985. We
further observe that instead of complete privatization,
the Japanese government via the NTT Corporation Law
decided that the government would retain one-third of
NTT’s share with it. As a result of this partial privatiza-
tion, NTT underwent structural re-arrangement along
with some amount of rationalization of employee
strength. NTT which had 3.1 lakh employees in 1985,
decreased to around 2.5 lakh in 1990.
The divestment route and planned turnaround taken by
NTT reaped huge benefits for the company, its employ-
ees, and customers. In subsequent years to divestment,
NTT was able to offer significant rate reductions in
IETE TECHNICAL REVIEW 7
various services and increment in salaries of its employ-
ees which shows improved managerial efficiency [12].
Sales per employee increased by 54%; from $114,000 in
fiscal 1984 to $175,000 in fiscal 1990 (12, NTT annual
reports).
The Indian government similarly needs to be cautious
and plan meticulously for disinvestment or privatization
moves. This also presents an opportunity to relook
whether instead of going for a total sell-out in case of a
strategic sale, the government should continue holding
majority stake and explore a turnaround within the gov-
ernment ownership framework, of even a partial yet con-
trolling stake like 25% 33% which is what appears to be
the route followed in NTT’s case.
5.1. Analysing reasons behind NTT’s privatization
and restructuring
We studied various rationales behind partial divestment
of the Japanese government enterprise. Major reason
behind NTT’s divestment was poor managerial efficiency
of top management of the company [12]. Management
structure of NTT had become too unwieldy. Number of
employees in the company had increased to a number
larger than required. Government had also increased
financial deficits in that time because of various reasons
and required some avenue for reducing them [19]. Uni-
versal telephone service had already been realized, mean-
ing landlines had penetrated all regions in Japan and the
needs of customers were becoming increasingly diverse
and sophisticated. It is not surprising that handling
such diverse needs would be considered increasingly dif-
ficult within the framework of a monopolistic, public
corporation structure. Divestment created competition
in telecommunications paralleling the progress in tech-
nological innovation.
The striking similarity in situations faced by the two
companies NTT and BSNL are hard to miss. We derive
some important conclusions on various parameters and
draw learnings from divestment of NTT, Japan for
Indian PSU BSNL.
6. Learnings from NTT and recommendations
to BSNL
6.1. Learnings from NTT
During the process of privatization of NTT [12], a pri-
vate consultative body named Provisional Commission
on Administrative Reform (PCAR) was formed to con-
sult the Prime Minister [12,19]. This body was
 8 R. PRAJAPAT ET AL.
considered a major decision-making body in privatiza-
tion history of NTT. It made quick decisions regarding
privatization of NTT, since it was aware of the situation
getting worse because of conflicts between various stake-
holders like telecom ministry of Japan, private players,
etc. Also since this PCAR body was appointed by the
Prime Minister himself, other relevant stakeholders had
no choice but to follow top-down decision made by
PCAR. Another observation about the PCAR body is
that the Chairman of this body was a private sector exec-
utive and was famous for his personal integrity, so the
decision was not influenced by politicians and had a say
of public of the country. Prior to privatization of NTT, a
CEO (chief executive officer) appointed from private sec-
tor had already implemented managerial reforms, hence,
building corporate culture in the company.
6.2. Recommendations to BSNL (partial divestment)
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Learning from NTT’s privatization, we conclude that the
Indian government must be clear on its vision and mis-
sion before taking any decision. The Indian government
can form a committee similar to PCAR and appoint an
influential person known for personal integrity as the
Chairman of this committee. Apart from initial decision-
making committee, a dedicated senior management
body could be set-up which can keep track of long-term
goals of the company. This body should be given auton-
omy and freedom from political influence. Efforts of
both bodies should be towards ensuring proper provision
of mobile and information and communications technol-
ogy (ICT) services [20] to customers at competitive rates
which would encourage healthy competition between
company and other private players.
At the same time, cost accounting system has to be for-
mulated to ensure sound financial health of firm and has
to be conveyed to relevant stakeholders. Company has to
be restructured in a manner that is able to maximize
gains on various technological advancements occurring
within the firm or within the telecommunication field in
general. Main features of restructuring of the company
[21] have to be conveyed to operational and ground staff
in order to have proper coordination between manage-
ment and labour in near future. Tariff decisions should
be transparent and should be based on standards fol-
lowed internationally.
As regards divestment, company should have flexible
norms in process of stock sales. An external consultant
should analyse the market size in the country, should
determine the company asset value, and then should use
above findings to conclude price offering levels. After
that, company can decide on adaptation of various place-
ment methods like domestic and overseas investors or
only overseas strategic investors or combination of above
suggested placements.
6.3. Recommendations to BSNL (technology and
operations)
Currently, BSNL does not hold any patent on its name,
suggests lack of technological advancements in company
[22]. Restructuring should definitely have a Technology
Management Department within the company in order
to keep the pace up with international players in the field
of technology which will look after selection and identifi-
cation of proper technology according to customers
need, strategic alliances with various technology suppli-
ers, technology transfer, technology absorption, and up-
gradation with the time, etc. It is not necessary that
BSNL starts doing all R&D work on its own. It can even
outsource the technology part to other technology com-
panies or start-ups, but it is necessary to constantly leap-
frog in technology capability to keep up level with other
private and international players.
Our interaction with employees has revealed that there is
employee disconnect between people even at middle
management, which suggests the need of various interac-
tion building programs in the company. Lack of skilled
workforce is another problem which employees at BSNL
consider in present time, so proper skill development
programs has to be launched within the company in
order to cope up with such issues. Employees at BSNL
consider that work culture at BSNL is not very energetic,
because of traditional way of work in government offices,
that entrepreneurial thinking is missing in the environ-
ment. Employees do not consider themselves being a sig-
nificant part of the company (as brought to light during
interaction with BSNL employees) and could contribute
better if efforts are made in right direction. For example,
proper receipt collection of post-paid services is not
being executed properly in BSNL offices which in turn is
creating money deficit in the company and adding to
growth of the company going negative. Once all these
issues like receipt collection, etc., start getting executed
in right manner, it will in turn have contribution in reve-
nue and profit of the company, hence, company can
invest more in advancement of technology. Also huge
infrastructure is lying around, means that full potential
of company’s resources has not yet been tapped.
From select interviews, we have found that marketing
efforts by BSNL have not been in full swing in past, so it
is recommended to boost marketing of various plans in

the market. There is severe effect of other telecom play-
er’s advertisement strategies on company and because of
that existing and prospective customers of BSNL are
sometimes unaware of various cost saving schemes
launched by the company only because they do not get
the information in the right frame of time which suggests
the need of increase in marketing by BSNL. As we dis-
cussed earlier, there is a clear need of technology
upgrade, we can see the live example, such as Reliance
and Bharti Airtel (from respective websites) like private
players are launching advance services like 4G in the
market and at the same time we do not see much efforts
from BSNL in this domain. Although BSNL has started
cloud business in collaboration with dimension data,
interestingly an NTT group company itself, but results
and impact of this step is still awaited. Now is the time
that company has to come out of its dormant stage and
play an active role in telecommunication industry in
India.
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Above discussed technology management issues, human
resource management issues, and opening up new
business segments issues give hints that there is a lack of
visionary senior executives and top management. BSNL
has only Chairman position to take all big decisions. A
separate Managing Director should be appointed in
order to fasten up the decision-making process. Board
composition can be improved by including prominent
people from industry with relevant skills; also separate
advisory boards should be created for different business
units.
We would like to conclude by giving implementation
steps for few major recommendations given in earlier
paragraphs. We will then talk about a radical approach
of restructuring the company. We realize that changing
work environment in the company at the top level as
well as in the middle level; enhancing business opera-
tions; adaptation to competitive technologies, etc., needs
competitive instincts within the top management and
employees, which seems difficult in government-owned
organization like BSNL because of current dormant
stage. This motivates to take partial disinvestment route,
as was the case with NTT, for improvements in com-
pany’s health which seems only option to create compet-
itive environment within the company and cope up with
above described issues. In depth, research specifically on
partial disinvestment is out of scope of this paper.
Restructuring as suggested in Figure 3 is motivated from
restructuring of NTT which happened gradually over
time. Separating wired businesses from wireless can
prove to be beneficial to BSNL. Note that this even can
help in effective disinvestment of the company in near
IETE TECHNICAL REVIEW 9
Figure 3: BSNL restructuring.
future i.e. options like disinvesting a particular wing of
BSNL, for instance wired telephony business, is possible
only if company is restructured in suggested way. Disin-
vestment should be done in such a manner that strategic
private partner(s) at no point cross the equity holding of
government in BSNL in order to ensure policy decisions
in interest of common man. These private partner(s) can
even fulfil the need of technology infusion in the organi-
zation timely. Furthermore, we see that the BSNL ICT
services business and the software product business
should have different board as well as top management,
since skills required handling them is different from cel-
lular services business. Most of our recommendations
are in line with Sam Pitroda [11],which shows that learn-
ings from privatization and restructuring of NTT can
actually be applied to Indian telecommunication giant
BSNL.
Acknowledgments
The authors heartily acknowledge support from SJMSOM, IIT
Bombay for providing environment to explore such research.
The authors also thank Prof. Kirankumar S. Momaya, Group
of Competitiveness, IITB; Prof. Karuna Jain, NITIE and
employees of BSNL for providing useful insights to the paper.
Disclosure statement
No potential conflict of interest was reported by the authors.
Funding
The authors heartily acknowledge IRCC and Wadhwani Foun-
dation for financial support.
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 IETE TECHNICAL REVIEW 11

Authors
Rahul Prajapat is a graduate in electrical
engineering at the Indian Institute of
Technology, Bombay (IITB). His special-
ization is in communication and signal
processing. He joined NTT Communica-
tions at Tokyo in September, 2015. His
research area includes telecommunica-
tion, computer networks, embedded
systems, social entrepreneurship, and
competitiveness. He as a mentor and participant has repre-
sented India in Mars Rover Expedition, Australia. He has expe-
rience in urban agricultural, defence, environment monitoring
projects, and manufacturing start-ups.
Lalit Lalwani is a research assistant at
Shailesh J. Mehta School of Management,
IIT Bombay. His research area includes
technology management and manufactur-
ing competitiveness. He received the
MBA degree in technology management
from CEPT University, Ahmedabad, and
graduation in automotive engineering
from Sardar Patel University, Gujarat.
E-mail: p14016@iitb.ac.in

E-mail: 10d070039@iitb.ac.in

Deepa More is an energy and environ-

mental professional and is currently pur-
suing doctoral research at SJM School of
Downloaded by [rahul Prajapat] at 02:48 02 April 2016

Management at IIT Bombay. Her core

areas include energy and environmental
management and sustainability issues in
context of Indian industry and have been
associated with companies and educa-
tional institutes in capacity of consultant
and faculty. She also takes keen interest in areas of traditional
seed conservation, organic farming, and water conservation
practices.

E-mail: deepa.m@som.iitb.ac.in