The merger of ailing state-run telecom majors BSNL and MTNL is likely to be a major part of the revival plan being worked on by the government, with official sources saying that the move is a “highly favoured” one within the telecom ministry. The Department of Telecommunications (DoT) is already working on the proposal, said officials, but a final decision on the matter will be taken by the Union Cabinet.
According to sector analysts, the merger, if approved by the Cabinet, would be a beneficial move for both the companies, since BSNL will gain from operational synergies and MTNL will gain wider access to the national market.
“MTNL is also currently limited to the Delhi and Mumbai market. A merger would give it better access to the national market and also allow it to let go of very expensive roaming and interconnect agreements since it will now have access to BSNL’s large network infrastructure,” pointed out a senior analyst who preferred to remain un-named.
A high-powered Group of Ministers (GoM) led by home minister Amit Shah, and including finance minister Nirmala Sitharaman and telecom minister Ravi Shankar Prasad, had met earlier this month to discuss a revival plan for the two cash-strapped companies. But, officials had said that while several measures including a VRS package were discussed, no final decision was taken.
Officials noted, however, that the merger was only one of the many proposals being considered for the revival plan, including the VRS package, 4G allocations, and land asset monetisation. “... (but) it is clear MTNL cannot stand on its own. The Cabinet will take the final view on that,” said the government source.
Both PSUs have been struggling to generate enough working capital to meet monthly expenses over the last two quarters, with salaries delayed for several thousands. BSNL’s provisional losses for financial year 2018-19 is estimated at Rs 13,804 crore, while MTNL’s losses for the year stand at Rs 3,398 crore.
While the entry of Reliance Jio in 2016 disrupted the telecom market and sparked off a costly price war, BSNL and MTNL’s oversized wage bills are also a crucial problem. According to the Union telecom minister, the annual employee cost of BSNL is a whopping 75 per cent of its annual revenues, while the number is even higher at 87 per cent for MTNL. BSNL had 1,63,902 employees, including 46,597 executive and 1,17,305 non-executive staff, on its rolls as on March 31, 2019.
According to the Sanchar Nigam Executives Association, the move would be good for both companies since several issues like cross payments and pan-India market access will be resolved. Challenges, however, include transfer of liabilities and human resources-related issues like pay packages.