The government has given in-principal approval for the merger and also announced that 4G spectrum will be allocated to BSNL and MTNL at the 2016 price.

BSNL and MTNL to be merged as govt announces revival package for ailing telcos
Money Telecom Wednesday, October 23, 2019 - 18:04

In a bid to revive ailing state-run telecom companies Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), the government has announced that the cabinet has given in-principal nod to merge both companies. Telecom Minister Ravi Shankar Prasad said that while the merger will take time, MTNL will be a subsidiary of BSNL till all required approvals and procedures for the merger are completed.

BSNL has a national presence, while MTNL operates in Maharashtra and Delhi.

The government believes that this move, along with the revival package it announced, will help BSNL turn EBITDA positive in two years and profitable soon after that.

EBITDA stands for earnings before interest, tax, depreciation and amortisation, and measures a company’s operating performance. 

In a cabinet briefing on Wednesday, the minister also elaborated on the revival package that has been put together.

Ravi Shankar Prasad said that the government has no plans of closing down or disinvesting BSNL or MTNL, both of which are important strategic assets of India.

In a bid to make these state-run telecom companies competitive and professional, Rs 15,000 crore will be raised through sovereign bonds, which will be serviced by BSNL and MTNL.

The government also announced that 4G spectrum will be allocated to BSNL and MTNL at the 2016 price.

The minister also announced that assets worth Rs 38,000 crore will be monetised in four years.

He also announced a voluntary retirement package (VRS), where if any officer who is over 53.5 years of age opts for VRS, he will be given 125% remuneration of the salary, pension and gratuity till the age of 60.

The minister claimed that this ‘attractive’ VRS package was something unions asked for and said that they will support it if put in place.

He added that if this strategic asset of the government has to be attractive, cost of human resources needs to be to cut down. “In other telcos, the human resources cost is just 5%, whereas in BSNL and MTNL it is 70%,” he added.

BSNL has Rs 1.76 lakh employees on its rolls and currently owes them salaries, which costs the company Rs 850 crore every month.

The government will be putting in Rs 29,937 crore on account of ex gratia and Rs 12,678 crore for pensionary benefit. Ravi Shankar Prasad also added that the GST cost of the 4G spectrum, which will come up to Rs 4,000 crore, will be adjusted from budgetary provisions.

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