BSNL and MTNL Merger Will Bring Back Financial Health for the Companies: Report

Benoy CS, Director, Frost & Sullivan remarked about the positive effects of a merger between the two government-led telecom companies

Highlights
  • The companies would have optimised costs, capex and opex if the merger were to happen
  • After the merger, the company would also enjoy better credit terms, which is a crucial aspect in the industry

Benoy CS, Director at Frost & Sullivan, Digital Transformation Practice has remarked that the merger of MTNL and BSNL, the two telecom companies of government, will be a good deal for all the stakeholders of the entities. He also highlighted that the merger of these two companies is something inevitable as the telecom industry is undergoing a rapid transformation. The executive also said that Reliance Jio’s introduction of cheap tariff vouchers and freebies are attractive to the consumers. However, they have also costed the health of the industry. Adding further to his words, he highlighted that reduced tariffs wouldn’t continue forever as the telecom industry is going through a rough patch right now.

Merger to Have Many Benefits for MTNL and BSNL

Talking about the industry health, Benoy said, “The good part is that our fundamentals are very strong. A growing economy, young population, high data usage, digitisation, untapped rural potential etc. are some of the positives for the industry from a long-term perspective.”

Benoy also talked about consolidation in the industry and highlighted that the number of operators in the country has come down from 8-9 to 4-5 “History teaches us that when things are not going well, it forces us to introspect and get back to basics. As always, private sector companies are quicker to act and adapt than public sector companies.”

Better Financials for MTNL and BSNL Possible Through Merger

The executive also did a thorough analysis of the merger of the two companies and said that the merger would have three significant benefits if it were to happen. The first of those three would be Cost Optimisation. He said that since the telecom industry is a business of scale, a merger would help these companies in going leaner and thus decreasing their capex and opex. They will also be able to optimise costs across service lines. Common products, marketing team, customer service team will also reduce redundancy.

Secondly, Benoy said that the merger would provide a big boost for their Enterprise and Wholesale Business. He said that post the merger, BSNL and MTNL together will be able to offer a tailor-made solution for the large and medium enterprises of the country thus giving them a boost. The global operators too will also have ease in working with a single entity.

Lastly, shedding some corporate light on the matter, he said that the merger would increase the overall valuation of the company and thus improve the financial health too. He said, “However, this merger will also have various challenges. And, one of the most challenging parts will be concerning the employees/resources. Being a public-sector entity, this challenge is manifold. It needs to be seen how the Government and DoT can navigate through the hurdles and succeed in merging the two entities. A successful merger will be good for all, including its employees.”

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KunalNikhil Mumbai-PuneTushar Malhotra Ludhiana PunjabAdilAsish Chandra Recent comment authors
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Asish Chandra
Asish Chandra

off topic: Can anybody provide me speed test of recently launched Airtel 4g @900mhz in Punjab, Mumbai, and Hyderabad
Thank you

City
kolkata
Operator
Airtel
Tushar Malhotra Ludhiana Punjab
Tushar Malhotra Ludhiana Punjab

Airtel 4G and its VOLTE in Punjab is mediocre. My friend is using it and the speed generally ranges between 8-20 mbps in peak hours. VOLTE is getting stable. But I personally think airtel is having very less Number of 4G users in Punjab, so less load on network and accordingly, the speed is not very good.
Void network is also having less load but speed ranges generally between 4-10 mbps.

DGupta
DGupta

Strange analysis. Merger will make them leaner – how? It still needs letting go of excess staff, selling off excess real estate, cutting down expenses while investing in 4G network and fiber broadband. Why will any of this be any easier by a merger when MTNL and BSNL can’t do it today? And why will MTNL+BSNL valuation be higher than the sum to their valuations today, without doing the cost cuttign and Usually mergers produce their own problems – staff and officers coming from BSNL and MTNL will fight with each other. There will be issues of paygrade and benefits.… Read more »

Kunal
Kunal

Government has to tackle the union issues smartly. They can not force the un wanted employees to resign . Government has offered voluntary retirement scheme to the employees but none are opting Salary delay may be a part of the tactical move by the government. They will put the employees under financial & mental stress to break them . I feel , Closure of BSNL /MTNL is no where on agenda , but to make them profitable is a priority. These sale talks at the moment are only pressure tactics . Government will be ready with the list of unwanted… Read more »

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