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

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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Balakrishna nData kumarEsmailNikhil Mumbai-PuneKiran Fernandes | Goa Recent comment authors
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Kiran Fernandes | Goa
Kiran Fernandes | Goa

Lol, been waiting for them to do this since like last year. They really need to merge. Merger is important. I won’t care much about BSNL wired broadband because they’re not gonna convert their ADSL into fiber any time before 2025. But they surely need to improve on 4G coverage and convert existing band 8 to 4G. 5MHz will do.

Nikhil Mumbai-Pune
Nikhil Mumbai-Pune

They have only 6.2Mhz in band 8.

Nikhil Mumbai-Pune
Nikhil Mumbai-Pune

Let’s see what happens.

Esmail

Provided the government renews their spectrum in band 8 in 2020 when it expires.

Data kumar
Data kumar

Jio/Govt will not allow Bsnl to operate in band 8 4G

lalitk (Mumbai)
lalitk (Mumbai)

Somebody said on the TT, there will VIL for some years, Airtel & Jio in coming years. BSNL & MTNL wil for sure megre even though they have huge debts they will still survive with help of GOI,, look at Air India.

Mani Mahesh Dhiman
Mani Mahesh Dhiman

Are you serious? Airtel and Jio will merge? No definately not. In future Vodafone idea may shutdown or sell their asset to Jio and Airtel.

Sayak Roy - Kolkata
Sayak Roy - Kolkata

If they do shut down, Airtel is in too much of debt to buy them, I feel. Maybe their assets will get divided amongst Airtel and Jio?

Mani Mahesh Dhiman
Mani Mahesh Dhiman

Yes very likely

Lalit K
Lalit K

Mtnl wireless network are to be taken over by bsnl and wired network will remain with them as per a local employee who recently came to my work place to get landline sorted

Nikhil Mumbai-Pune
Nikhil Mumbai-Pune

+1

Kiran Fernandes | Goa
Kiran Fernandes | Goa

Lalit that’s actually really good. I hope this plays out sooner. BSNL should stop with all their per day GB plans though.

Nikhil Mumbai-Pune
Nikhil Mumbai-Pune

That’s certainly not possible for next three years.

Lalit K
Lalit K

I mean too say they will be there as separate entities.

Also as per latest news MTNL employees have not got the salaries for Nov due to eroded financial health. Internally management is now pushing for merger asap

Nikhil Mumbai-Pune
Nikhil Mumbai-Pune

+1

Nikhil Mumbai-Pune
Nikhil Mumbai-Pune

Airtel and VIL debt is not much different. Some few 1000 crores difference only.

It’s high time they should launch bulk data plans in Prepaid as well, espcially Airtel. 30GB bulk data for 28 days in 349 and 60GB data in 499.Also they can try 500MB/Day plan for 299 and 2GB/Day plan for 499 for 84 days along with unlimited calls on both plans. People will opt for this plans and Airtel ARPU will boost up immensely. That’s the only way to counter Jio or loose to Jio and people will face monopoly.

Nikhil Mumbai-Pune
Nikhil Mumbai-Pune

People are not opting for Airtel postpaid due to unethical practices used by then in past. Vodafone-Idea due to capacity. Now networks are good enough to be compared with Jio atleast in big cities and then should think innovative to counter Jio before next auction.

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