BSNL, Vodafone Idea Merger Only Solution: Deutsche Bank

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Both Bharat Sanchar Nigam Limited (BSNL) and Vodafone Idea (Vi) are struggling really hard to maintain their position in the Indian market. Neither of the telcos has been profitable for a long time and are also not getting sufficient cash-inflow to sustain for a long period. Vi is looking for raising capital while BSNL is trying to push its 4G operations, but neither of the telcos has gotten any further. Looking at this, Deutsche Bank said that the only viable solution for the government to save either of the telcos is to merge them, reported ET Telecom.

Vi Investors Shouldn’t Have Very Big Problem With This

Deutsche Bank said that Vodafone Idea’s debt is too high, and the government can ease the telco’s pain by converting that debt into equity for itself by merging Vi with BSNL. The brokerage further said that even if this happens, the investors of Vi shouldn’t have a very big problem because the telco’s debt is 6x more than its current market cap, which is not a good sign. If a merger takes place this way, the shareholders of the company would be diluted heavily.

At present, Vodafone Idea owes the Department of Telecommunications (DoT) Rs 1.5 lakh crores in adjusted gross revenue (AGR) dues and deferred spectrum payment dues. As per a report that came in yesterday, both of the Vi promoters, including the Aditya Birla Group and Vodafone Group Plc, are ready to reduce their stake in the company if there is another investor who is ready to take over the company. But for that to happen, the promoters have a condition that the new investor would need to purchase the shares of the company at a premium over the current market rate.

This could actually be a viable solution for the government to ensure that both BSNL and Vodafone Idea don’t go out of business, turning India into a duopoly market for the telecom sector.

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