The merger is part of a strategy to revive the ailing telecom companies along with asset monetisation and allocation of 4G spectrum.

Govt working on plan to merge BSNL and MTNL cabinet to take final call
Money Telecom Wednesday, July 31, 2019 - 17:33

As part of the plans to revive the public sector telecommunications companies, BSNL and MTNL, the government may decide to merge both the entities. Though the proposal for merging them has been made earlier too, it never got going for various reasons.

The once monopolistic organisations, BSNL and MTNL have become a huge drag on the state exchequer following the opening up of the sector to the private players. These companies have disproportionate staff strengths and a typical government-like work culture which does not suit a consumer-facing service industry like telecom. It is also a highly technology-oriented business and quick decision making is essential to stay in the business. The easiest way for the government would have been to disinvest in BSNL and MTNL and get out of the business.

However, one estimate suggests that the government will stand to lose a much higher amount if it decided to shut down the companies. It was therefore reported that a Rs 74,000 crore package has been worked out where the funds will be provided to the companies tied to certain stipulations, like downsizing the workforce through favourable or golden handshake settlements etc.

The proposal to merge may be part of these stipulations if this latest source is to be trusted. Of the two, MTNL is listed on the stock exchange while BSNL is not. There is no clarity on whether there will be a complete merger or MTNL will be made a subsidiary of BSNL. The Union Cabinet has to take the final decision on this. Some insiders point out that there are some salary issues between the two companies, which is the hurdle in their merger.

These companies need to be funded to obtain the infrastructure for providing 4G services to its customers. If MTNL and BSNL were to offer 4G services efficiently the companies can yet regain some of their business. The tower and other infrastructure can be monetised to reduce the losses being incurred.

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