MTNL Chief Bats For Merger With BSNL

State-run MTNL, which has telecom operations in Delhi and Mumbai, has urged the government to create a special purpose vehicle (SPV) to transfer its Rs 20,000 crore debt and assets, including 1,100 towers and lands and buildings, to deleverage balance sheet. It has also sought merger with BSNL to expand operations across India and optimise network utilisation.

“In today’s below cost competition, consolidation of BSNL and MTNL as one entity is the need of the hour and only way to survive. Fragmented operations can only lead to their extinction,” MTNL chairman and MD Praveen Kumar Purwar told Financial Chronicle.

MTNL needs to be nurtured and once it’s strong enough, an alliance with BSNL can be explored, he said.

“We don’t want to create a burden on BSNL. But it calls for addressing the Rs 20,000 crore debt and high employee cost by the government. MTNL has 23,000 employees. We want government to address these issues by transferring them to another structure”, he said.

He said MTNL is a viable entity and can survive in the long-run. But it needs to work in synergy with BSNL. Sub-optimal scale of operations is also not sustainable, he said.

MTNL’s losses in Q2 widened to Rs 859 crore on standalone basis, mainly on account of increase in finance cost and a decline in sales. The employee cost accounted for 92.2 per cent of the total income of the company and around 29 per cent more than its revenue from operations at Rs 572.83 crore. The auditors of MTNL in a note said the net worth of the company has been fully eroded. BSNL, the PSU that MTNL wants to form an alliance with, also has a debt of Rs 10,000 crore and has incurred Rs 4,785 crore loses.

Telecom minister Manoj Sinha said earlier for merger of BSNL and MTNL, there are various challenges/is employees, debt, government shareholding in MTNL (56 per cent) and the rest are held by public and institutional investors. MT-NL is a listed company where are BSNL is 100 per cent owned. It has 1.70 lakh employees and out of Rs 28,000 revenues, its pays salaries worth Rs 16,000 crore annually.

There has to be separate structure like an SPV to take over Rs 20,000 crore debt of MTNL, and the tower and land assets to avoid burden on BSNL in case such consolidation takes place. – My Digital FC