Will BSNL and MTNL be merged by July 2015?

THE government has for quite some time been talking about the possible merger of twin telecom major: BSNL, MTNL. The once crowning jewels of the government have been facing tough time with successive losses in revenue share to more efficient and more competitive private players.

The plan with the government is that...

a healthy merger of the two PSUs will make a competent move in the telecom market.

Now, the telecom department (DoT) has for the first time set a tentative cutoff date—July 31, 2015—for concluding the much awaited merger of struggling PSUs.

In a presentation to Prime Minister Narendra Modi, DoT said it expects to "secure Cabinet approval for the proposed BSNL-MTNL merger by June 30 next year".

The department expects to finalise the merger consultations with the unions of BSNL and MTNL by March 31, 2015, and circulate a draft Cabinet note for inter-ministerial consultations by April 30 next year. MTNL runs telecom services in Delhi and Mumbai while BSNL offers telecom coverage in the rest of India.

DoT has already set additional deadlines for concluding pending organisational restructuring initiatives in both the telcos. It has set a December 31, 2014, deadline for hiving off BSNL's mobile towers into a wholly-owned arm and also monetising BSNL and MTNL's property holdings to unlock value for their survival, the minutes of DoT's presentation show.

BSNL has 61,622 mobile towers, the second largest tower portfolio among all telcos. 

BSNL is also the holder of one of the largest land banks among state-owned firms with properties worth thousands of crores of rupees across 3,500 towns. 

BSNL had said it hoped to raise nearly Rs 500 crore in the first year from leasing parts of its land holdings and would also offer its telecom factories to contract manufacturers to generate cash.

MTNL's land and building assets are calculated above Rs 3,000 crore.

DoT is also mulling financial support to compensate MTNL for liabilities stemming from its minimum alternate tax (MAT) payout, which is Rs 780 crore.

DoT also proposes to fund MTNL's capex needs for expanding its mobile, landline and broadband networks. According to a media report, the company had sought Rs 2,000 crore from DoT for meeting network expansion capex costs over a three-year span.

BSNL and MTNL have an infrastructure-sharing pact for providing joint services to companies. They share assets such as buildings, mobile masts and international long distance phone networks to service mostly enterprise customers.