The department of telecom (DoT) is planning to offer a soft loan to the tune of Rs 11,000 crore to the loss-making state-run telecom operators Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL). This seems to be a move to address BSNL's concerns about taking on MTNL's mammoth debt on its books.
As on March 31 (2014), the total debts in the books of BSNL and MTNL stand at Rs 5,948 and Rs 14,210 crore respectively.
The biggest problem for these companies is high employee cost and the legacy of their local fixed line businesses. BSNL has 25 times more employees than Bharti Airtel, the top telecom operator, with half the revenue. MTNL has three and a half times more employees, with barely a tenth of Bharti’s revenue. Note that till 2008, both BSNL and MTNL were among India’s most cash-rich companies, with combined cash and equivalents of nearly Rs 45,000 crore.
BSNL was India’s fifth largest mobile operator, with around 95 million subscribers, less than half of Bharti Airtel’s 200.4 million subscribers at end of March in this year.
Presently, BSNL is facing heat from smaller private sector operators such as Airtel, Vodafone, Aircel and Uninor. MTNL has operations in Mumbai and Delhi only. The operator's current mobile subscriber base is less than what it had in March 2007. MTNL has become one of the most indebted telecom operators.