MTNL Should Merge With BSNL Based on a Special Purpose Vehicle: MTNL Chairman

By December 3rd, 2018 AT 3:02 PM

The government led debt-ridden telecom operator, Mahanagar Telephone Nigam Limited (MTNL), which operates in Delhi and Mumbai circles has urged the government to package a Special Purpose Vehicle (SPV) so that the Rs 20,000 crore debts and assets including 1,100 towers, lands and buildings are deleveraged to correct the financials of the company. MTNL has also talked to the government about a merger with BSNL so that the telco will be able to expand operations across India on the basis of network utilisation.

mtnl-bsnl-merger

MTNL Chairman Asks for SPV from Government

MTNL chairman and MD, Praveen Kumar Purwar told said in a statement, “In today’s below-cost competition, consolidation of BSNL and MTNL as one entity is the need of the hour and the only way to survive. Fragmented operations can only lead to their extinction.” He said that the government would need to work for MTNL’s sustenance and once the telecom operator’s financials are strong enough then a merger will BSNL can be ideated upon.

He further added to his statement, “We don’t want to create a burden on BSNL. But it calls for addressing the Rs 20,000 crore debt and high employee cost by the government. MTNL has 23,000 employees. We want the government to address these issues by transferring them to another structure.”

The chairman remarked that in the long term, MTNL is a viable entity and can survive with a long run horizon, however, it will need to work in synergy with BSNL for that to happen. He also added that sub-optimal scale of operations is not something which will make the entity sustainable.

In Q2 this year, MTNL reported that its losses grew to Rs 859 crore standalone, with the notable causes for the same being increase in finance cost and deteriorating sales. The employee cost made up for 92.2% of the total influx of the company, which was 29% more than the revenue generated from its operations of Rs 572.83 crore. Going by the words of the auditors, the net worth of the company has been fully eroded. Bharat Sanchar Nigam Limited, (BSNL) the prospective telco with which MTNL wishes to merge, also stands under a debt of Rs 10,000 crore and has registered losses of Rs 4,785 crore in the same period.

Telecom Minister on MTNL and BSNL Merger

Telecom minister had also remarked earlier on the topic of BSNL MTNL merger saying that there are numerous challenges on the way of BSNL and MTNL alliance like employees, debt, government including shareholding in MTNL (56%) and the rest being held by public and institutional investors. While MTNL is a listed company, BSNL is 100% owned. The company boasts of having 1.70 lakh employees and out of the Rs 28,000 crore revenues, it also hands out Rs 16,000 crore annually in salaries only.

Manoj Sinha had said that there would need for a different structure like an SPV, which would help in taking over the Rs 20,000 crore debt of MTNL, including the tower and land assets. This move would take the burden off of BSNL’s head, in case the consolidation happens.

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Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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