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Cabinet Gives In-Principle Approval To Merge BSNL, MTNL

The merger between BSNL and MTNL will not happen immediately, says Telecom Minister Ravi Shankar Prasad

Signage for BSNL is displayed atop the company’s head office in the Churchgate area of Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)
Signage for BSNL is displayed atop the company’s head office in the Churchgate area of Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

The Narendra Modi government has given its in-principle approval to merger of two state-run telecom companies Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd. as part of a revival plan.

The merger will not happen immediately, Telecom Minister Ravi Shankar Prasad said in a press briefing in New Delhi, without specifying a time frame. Since MTNL is a listed company, due process will have to be followed, he said.

As part of the revival plan, MTNL will become a subsidiary of BSNL till the merger is completed, Prasad said, adding that BSNL will deliver operational profits in two years.

Under the announced package for the two public sector units, the allotment of 4G spectrum will be funded by the government through capital infusion of Rs 20,140 crore, the government said in a statement. Goods and Service Tax payout worth Rs 3,674 crore on the spectrum will be waived, it said.

Out of this, BSNL will get Rs 14,115 crore through equity by the government, a senior government official told BloombergQuint requesting anonymity. The government will infuse Rs 6,295 crore in MTNL through non-cumulative preference shares, the official said.

MTNL requires Rs 1,100 crore as capital expenditure for 4G infrastructure, while BSNL needs around Rs 11,000 crore for the same, the official quoted earlier said.

The two state-owned public sector telecom operators will raise Rs 15,000 crore through long-term sovereign-backed bonds, helping them in restructuring their existing debt and meet their capital expenditure, the statement said.

The total debt of both MTNL and BSNL stood at Rs 40,000 crore, Prasad said.

While BSNL has made operational losses for four years through financial year 2017-18, MTNL reported operational losses for five straight years till FY19, according to the telecom operators’ websites.

BSNL and MTNL will monetise their assets to raise resources for retiring debt, servicing bonds, network upgradation, and to expand and meet their operational fund requirements, the statement said. The companies have been given a target of Rs 37,500 crore to monetise their assets over a period of three years, the official quoted earlier said.

The two firms will also offer voluntary retirement to their employees, aged 50 years and above through an “attractive” scheme, the statement said. The cost for the same will be around Rs 30,000 crore and will be borne by the government through budgetary support in a staggered manner.

As on August, BSNL had 11.6 crore subscribers, while MTNL had 34 lakh users. The two state-owned companies have a combined subscriber market share of 10 percent, according to data compiled by BloombergQuint.

Here are the other highlights from the cabinet briefing:

  • MTNL and BSNL are neither being closed nor divested.
  • Attractive voluntary retirement packages will be offered.
  • MTNL, BSNL have debt of Rs 40,000 crore.
  • Assets worth Rs 38,000 crore will be monetised.
  • Government will adjust goods and services tax that will have to paid for 4G spectrum.
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Watch the cabinet briefing by Ravi Shankar Prasad and Prakash Javadekar:

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