Bharat Sanchar Nigam Limited (BSNL) has been struggling for more than a decade now to operate the telecom services business in India. At the same time, Vodafone and Idea’s merged entity — Vodafone Idea (Vi) has been trying to stay afloat in the stiff competition of India’s telecom industry. Private operators including Reliance Jio and Bharti Airtel have only been profitable amongst all the operators, which, to be frank, aren’t many!
With Vodafone Idea’s board accepting the conversion of statuary debt to equity for the government and the centre most likely to hold the maximum stake in the telco post equity conversion, is there a place for BSNL and Vodafone Idea merger?
Government Might Create a Merged Entity and Find a Purchaser
The Indian government is trying to get rid of loss-making assets. Air India is a classic and strong example of this. There could be a motive of merging Vodafone Idea and BSNL and then selling it as a merged entity to another private group.
Earlier, Kumar Mangalam Birla had already shared his intention of selling his stake in Vodafone Idea to the government. But the government wasn’t interested in that. It wouldn’t have been a good deal for the government as Vi has accumulated a mountain of debt on its shoulders. The centre wouldn’t have liked to upgrade from one loss-making telco to two loss-making telcos.
It will be a financial mess for the government if it tries to run both the telcos together. However, one alternative for this could be that the government merges both the entities and offers it as a package to a new buyer.
Tony Verghese, Partner, J Sagar Associates (JSA), said whether the government would combine the businesses of BSNL and Vodafone Idea looking for a new purchaser remains to be seen. However long-shot it is, this is something that will certainly walk in the minds of consumers.