BSNL-MTNL merger shelved as GoM says not feasible; Cabinet to meet soon

The plan to revive the state-owned telecom companies — Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) — by merging the two entities is set to be shelved after almost two decades of deliberations on the matter. A six-member group of ministers (GoM), mandated to take a call on the issue, is learnt to have recommended last week that a merger would neither be beneficial nor feasible, thereby closing a long-drawn chapter in the telecom sector.

The Union Cabinet will meet soon to formally decide against such a merger.

While the merger idea goes back to the time of Pramod Mahajan when he had proposed it first as then communications minister, Dayanidhi Maran holding the portfolio later had started the process in 2004 to create the country’s biggest telecom firm.

More recently, the current government revisited the idea. BSNL-MTNL merger was part of a four-stage revival plan proposed by the Department of Telecommunications (DoT) and approved by the Cabinet in October 2019. Subsequently, a GoM was entrusted with expediting the Rs 70,000-crore merger plan.

But a meeting last week chaired by Defence Minister Rajnath Singh decided to recommend cancelling the merger to prevent further erosion of BSNL’s value, said two government officials. DoT, too, favours the proposal to call it off, one of the two officials said.

Apart from Singh, the GoM members included Information Technology and Telecom Minister Ravi Shankar Prasad, Home Minister Amit Shah, Finance Minister Nirmala Sitharaman, Commerce Minister Piyush Goyal, and Petroleum and Natural Gas Minister Dharmendra Pradhan.

Instead of a technical merger, the government’s proposal now is to integrate the operations and some manpower of MTNL with BSNL. The end goal is to phase out MTNL, one of the officials quoted above said.

In fact, BSNL will start providing services in the metro cities on behalf of MTNL from March 1. This was because the Union Cabinet had proposed that MTNL could operate as BSNL’s subsidiary until the merger of the two was complete.

“This would be the way out for MTNL.

The services provided by MTNL would be provided by BSNL in future,” said a government official.

Some MTNL staff will be moved to BSNL and others will opt for the Voluntary Retirement Scheme (VRS). The government had already offered VRS to the employees of both companies as part of a revival plan.

According to the official figures, over 92,000 employees have opted for the VRS package: Over 78,000 from BSNL and more than 14,000 from MTNL.

Earlier, BSNL’s workforce stood at 150,000 and that of MTNL at 22,000.
There are other indications that the government is not keen on keeping MTNL afloat — a new chairman and managing director (CMD) of MTNL was not appointed and a further extension has been given for additional charge of MTNL to BSNL CMD P K Purwar.

Currently, with the merger off, the process of infrastructure and network synergies is underway. Simultaneously, the government has initiated the process to monetise the assets of the companies. The asset sale process began in July 2020 after consultancy firms CBRE, JLL, and Knight Frank were taken on to kick-start the monetisation drive.

The real estate assets include land as well as rental and leasing of buildings. MTNL has around 29 retail outlets in Delhi alone. Monetising real estate assets worth Rs 37,500 crore is part of the overall Rs 70,000-crore relief package that will be used to retire debt, upgrade networks, and offer a VRS aimed at reducing the companies’ employee strength by half.

In October 2019, along with the BSNL-MTNL merger plan, a relief package was put together that included a sovereign bond issue worth Rs 15,000 crore, to be serviced by the two telcos.

The plan also entailed allotting 4G spectrum at an administered price, pegged at the 2016 auction value, to both companies. They were to be allotted spectrum worth Rs 20,140 crore — Rs 29,937 crore for VRS covering 50 per cent of their employees and Rs 3,674 crore for the goods and services tax that will be levied on the allocation of radiowaves. Business Standard