BSNL and MTNL Merger, is it Necessary

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BSNL

The central government is looking to merge the two telecom public sector units (PSUs) – BSNL and MTNL, to enable a better future for them. It is not a fresh concept, and it is definitely not going to happen in a linear and smooth fashion. While none of the two is a profitable entity, the employees of BSNL have expressed their concern that the merger would bring irreparable damage to BSNL. The talks of the BSNL and MTNL merger come and go after every few seasons. But this time, the development looks much more serious.

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Despite that, the merger of BSNL and MTNL would be a very complex process. While the government is taking the decision of the merger, the management of the two companies also needs to come on the same page. The biggest question that anyone would have here is, why is the merger necessary in the first place? Why not allow both companies to operate independently if the merger is going to bring a lot of complexities? Well, the government sort of gave an answer to these questions with the relief package it announced in 2022.

To recall, the central government rewarded BSNL and MTNL with a Rs 1.64 lakh crore relief package in 2022. The relief package allows BSNL and MTNL to raise money through sovereign guaranteed bonds that would allow them to pay off high-cost debt sooner. This would bring the two telecom PSUs to a much better state in short to medium-term.

Post that, the merger between the companies would make a lot more sense as the high debt of MTNL would have been reduced. The merger will benefit the companies as time passes. Currently, MTNL only operates in Mumbai and Delhi, while BSNL operates PAN-India. Thus, a merged entity would enable the company to form a better customer retention strategy and allow the lowering of costs. The Rs 1.64 lakh crore relief package is actually the trigger for the merger talks to resurface.

The government has already appointed Deloitte as the transaction advisor for the merger. Since it is a complex process, it would take a bit of time before things can move ahead smoothly. The government has maintained that BSNL would be able to bring profits in the next four years because of the relief package.

To be honest, it looks like an empty statement right now. Before the telco can actually improve performance metrics in different areas, including subscriber addition, it can’t possibly imagine any profits.

Again, coming back to the question of whether a merger is necessary or not, the answer would be, who knows? I think it is a matter of trying and finding out. For the government, the simple thing is, what’s there to lose? In the most literal sense, yes, there are billions of dollars of taxpayers’ money that would be lost, but it’s going to waste anyway if BSNL isn’t revived. With BSNL, I think the government can go with the trial-and-error approach.

Since it is a large telecom PSU, it employs thousands of people directly and indirectly. Thus, shutting the shop would be detrimental not only to the employees but also to the digital economy that the central govt is trying to build.

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