BSNL-MTNL Merger May Solve Their Woes

Merging the two ailing state-run telcos — Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd — can solve their problems, say experts.

MTNL’s merger with BSNL means the former will be able to expand operations in India on the basis of network utilization.

Its debt is less than that of private entities and it also has assets.

In a competitive market, driven by Mukesh Ambani-led Reliance Jio, along with Bharti Airtel and Vodafone-Idea, the consolidation of the two telcos might help them stay afloat, say experts.

“Everyone seems to be consolidating, and MTNL and BSNL should revisit this proposal,” said Annie Morees, former member (finance), Department of Telecommunications (DoT).

BSNL-MTNL merger likely to solve their problems, say telecom experts
A telecom company executive said together they would make a stronger entity because they have real estate assets and the spectrum and resources to function as a team.

MTNL, once reputed to be a policymaker and operator for the Department of Telecom­munications (DoT), has lost ground and credibility primarily owing to labour issues and political interference. The company being overstaffed (with around 23,000 workers) has turned into a huge disadvantage for it.

MTNL employees want the voluntary retirement scheme (VRS) after the implementation of the third pay revision, which translates into a Rs 300 crore increase in employee benefit expenses. One of the solutions provided by the company to increase the revenue includes focus on the broadband and fibre-to-home business, which the company is managing well. The company expects to gain Rs 500 crore annually from this business.

“MTNL had a great opportunity to consolidate in the two prime circles of Delhi and Mumbai. 3G spectrum was given to MTNL but political interference is one of the many reasons the company could not achieve what it had set out to,” an industry expert said.

The company wants to surrender its 3G spectrum, which will give the company Rs 3,500 crore, which can be used for running the company, paying the salaries of its staff and investing in the landline business, which is doing well.

The company has loans worth Rs 20,000 crore on its books, which it took for paying the central government statutory dues. MTNL wants the government to convert these loans into loans with sovereign guarantees with full responsibility for principal and interest payment, which is expected to save the company Rs 2,000 crore annually on interest payment.

In its revival plea to the central government, MTNL had expressed willingness to venture into fourth-generation or 4G services if they are fully financed by the government.

The public sector unit also wants the government to monetize its unused or underused real estate assets. BSNL too has a similar plan.

Monetizing assets of the two companies, coupled with network upgrade (through fund infusion), can give them a lifeline. Managing the huge manpower of the consolidated unit, however, would remain a challenge.

BSNL has sought intervention from the telecom department. The sick PSU wants to be allowed to rent its land (it has about 7,500 plots in the country with a rough valuation of Rs 70,000 crore) to other central public sector units instead of selling them. The Union government is also working on a bailout package of Rs 13,000 crore for BSNL, which includes a Rs 6,365-crore voluntary retirement package and 4G spectrum allotment through a Rs 6,767-crore equity infusion and monetising real estate.

BSNL is expected to post a loss of Rs 7,000 crore, including a Rs 4,000-crore operational loss, due to depreciation in FY19.

In the July-September quarter of the current financial year (2018-19), MTNL’s standalone losses grew to Rs 859 crore owing to increase in finance cost and decline in sales. Employee cost accounted for 92.2 per cent of the cost of the company, which was 29 per cent more than the revenue generated from its operations of Rs 572.83 crore.

MTNL has not paid salaries to its employees in the last two months, a first in its 18-year history.

Its debt stands at Rs 13,500 crore, while that of the telecom sector is Rs 6.1 trillion.―Business Standard