BSNL and MTNL to get merged before getting sold
The Union Cabinet, headed by the Prime Minister of India – Narendra Modi, has approved the merger of 2 cash-starved Stated owned telecom entities – Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL).
The package includes Rs. 15,000 crore infusion via sovereign bonds, a Voluntary Retirement Scheme (VRS) and allocation of 4G airwaves. The Cabinet has also agreed to a Rs. 38,000 crore-asset monetisation scheme over 4 years, while 4G spectrum would be allocated administratively at 2016 prices.
Speaking on the occasion, the Minister for Communications and Electronics and Information Technology – Ravi Shankar Prasad said, “4G spectrum will be allocated administratively at 2016 prices.”
He further added, “Neither BSNL nor MTNL will be closed, disinvested or sell off but the government wants to make them professional.”
As per the terms, the stock listed MTNL will become a subsidiary of BSNL till the time both entities are completely merged. The Government will pay Rs. 4,000 crores from the budget provision towards spectrum expense. The Government would be putting in Rs. 29,900 crores ex-gratia. Both BSNL and MTNL have high revenue-to-wage ratio. BSNL has a headcount of 1,63,000 employees, while MTNL employs 22,000 people.
Talking about long-term goals, he said, “In 2 years, BSNL will become EBITDA positive, and the Group of Ministers (GoM) with further decide the future course of action.”
Following Tuesday’s late evening intervention by the Prime Minister Office (PMO), the Department of Telecommunications (DoT) had sent the note to the Cabinet without the Ministry of Finance (MoF) response. The Department had sought comments from MoF in respect to the Cabinet memo circulated to the nodal ministries. The MoF had previously opposed any financial backing to BSNL and MTNL as it would be a huge burden on the budgetary resources of the Government.
Industry bodies – PHD Chambers of Commerce and the Telecom Exports Promotion Council TEPC have hailed the Centre’s move to revive the 2 telecom companies.
Speaking on the occasion, PHD Chamber of Commerce and Industry Telecom Committee Chairman and Co-Chairman of TEPC – Sandeep Aggarwal said, “We welcome the Cabinet approval of the revival package of BSNL and MTNL. The much-needed support will help the two telcos to a turnaround in next 2 to 3 years of time.”
It is to be noted that both BSNL and MTNL together have a debt of Rs. 40,000 crores.
