All about government's plan for BSNL-MTNL merger

NEW DELHI: The Cabinet has approved a revival package for the two ailing telcos— Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), which includes Rs15,000 crore infusion via sovereign bonds, a voluntary retirement scheme (VRS) and allocation of fourth-generation (4G) airwaves, besides an eventual merger of the two loss-making state-run operators.
The Narendra Modi-headed Cabinet has also agreed to a Rs 38,000 crore-asset monetisation scheme over four years, while 4G spectrum would be allocated administratively at 2016 prices, telecom minister Ravi Shankar Prasad said at a briefing Wednesday.

“4G spectrum will be allocated administratively at 2016 prices,” Prasad said, and added that the government will pay Rs 4,000 crore from the budget provision towards spectrum expense.

“Neither BSNL nor MTNL will be closed, disinvested or sell off but the government wants to make them professional,” Prasad said.

“Rs 15,000 crore worth of sovereign bonds will be given to them,” the minister said.

MTNL which is a stock-listed company, according to him, would become a subsidiary of BSNL till the time both entities are completely merged.

“MTNL will act as a subsidiary of BSNL,” he said and added that the government aims to merge both firms together but the entire process would take a longer time.

“Attractive VRS packages will come up which is voluntary, and not a forced one,” Prasad said, and added that the government would be putting in Rs 29,900 crore ex-gratia.

Both BSNL and MTNL have high revenue-to-wage ratio. BSNL has a headcount of 163,000 while MTNL employs 22,000 workforce.

Both the telcos, according to him, are strategic assets which comes to the rescue on natural disasters.

Prasad also said that the assets worth Rs 38,000 crore would be monetised in the coming four years.

“In 2 years, BSNL will become Ebitda positive, and the Group of Ministers (GoM) with further decide the future course of action,” he added.

Following Tuesday’s late evening intervention by the Prime Minister Office (PMO), the Department of Telecommunications (DoT) had sent the note to the Cabinet without the Ministry of Finance (MoF) response.

The department had sought comments from MoF in respect to the Cabinet memo circulated to the nodal ministries.

The finance ministry had previously opposed any financial backing to state-driven telcos, and added that any upfront support to BSNL and MTNL would be a huge burden on the budgetary resources of the government.