BSNL has decided to offer VRS to one lakh employees.

After the telecom war began in India, the state owned companies like BSNL began to bleed. More so after the recent 3G and Broadband Wireless Auction (BWA). Procuring spectrum led to a huge outgo which deteriorated their financial health. Over staffing was another issue which hurt the bottom-line. As a result, BSNL has decided to offer voluntary retirement scheme (VRS) to 1 lakh employees. It may be noted that salary burden constitutes 48% to the BSNL's operating cost. If the employees opt for VRS it may come down considerably. Also, these employees have an average age of 50 years and do not have the requisite skill set. Thus, relieving them is a better option for the company.

It is interesting to note that the profits of BSNL have been declining continuously since 2004-05. Now, it hardly poses any threat to major telecom players. It has lost market share and is suffering from operational inefficiencies. Also, the telecom landscape has changed considerably now. Call rates have been commoditized and there is stiff competition in the market. Thus, recovery happens to be far off for BSNL. May be, it's high time for the company to consider winding up rather than operate in losses. Nevertheless, it is considering various plans like monetizing its tower assets and lease out the network for revival. But we don't think that will be sufficient to re-gain the past glory.