Decision on BSNL, MTNL merger to be taken in 4-5 months

THE Centre will take its call on the proposed merger of state-run BSNL and MTNL in the next four-five months, telecom secretary Rakesh Garg said. But there are hurdles before the final merger takes shape.

"BSNL, MTNL merger decision will be taken in four-five months after studying the IIM report on it," he said. The Indian...

Institute of Management (IIM) report on the proposed merger is likely to be submitted shortly.

Communications and IT Minister Ravi Shankar Prasad had earlier said BSNL and MTNL's debt stood at Rs.4,459 crore and Rs.14,120 crore, respectively.

The department of telecommunication in September 2014 had set a deadline of July 31, 2015 for closing the merger of MTNL and BSNL.

Whereas MTNL operates in Delhi and Mumbai, BSNL offers telecom services in the rest of the country.

BSNL with 61,622 mobile towers has the second largest tower portfolio among all the telecom service operators.

The Department of Telecom (DoT) had asked IIM Bangalore to prepare a feasibility report on merger of state-run BSNL and MTNL.

Garg said DoT will take 4-5 months to study the report and then take a call on the merger.

In a bid to revive BSNL and MTNL, DoT is taking various initiatives as both the state-run companies have been making losses and losing market share to private telecom operators.

BSNL had incurred Rs 7,019 crore loss in 2013-14, Rs 7,884 crore in 2012-13 and Rs 8,850 crore in 2011-12, whereas MTNL had reported a loss of Rs 5,322 crore in 2012-13 and Rs 4,109 crore in 2011-12.

The revenue has declined for reasons including fixed to mobile substitution leading to surrender of wireline connections, delay in expansion of GSM capacity, perceived poor quality of customer services and high reduction in income from sources other than services.

But the expenses for both the PSUs has gone up because of legacy workforce whose salary and wages are more than 50 percent of revenue, increasing repair and maintenance costs and high interest burden in case of MTNL.

The government has time and again taken a slew of measures to bring the two state-run companies out of financial distress.

These include treatment of pensionary liabilities of government employees absorbed in MTNL who opted for combined service pension on parity with similar employees in BSNL, waiver of government loan to BSNL involving an amount of Rs 1,411 crore and financial support of Rs 492 crore to MTNL towards payment of minimum alternate tax.

In March this year, following a statement in Parliament by heavy industries minister Anant Geete that five public sector undertakings (PSUs) which are in the list of 65 sick PSUs would be closed down, panic gripped many employees in MTNL also since the once-crowning jewel of the government is now struggling for survival. There were apprehensions that the Centre might sooner or later close the telecom service provider since MTNL and Air India have now been clubbed in the list of 65 sick PSUs. However, later telecom minister Ravi Shankar Prasad said that there is no plan to shut down loss-making telecom company MTNL, and the government is taking various measures to revive it. The five PSUs to be closed down include three HMT units, Geete had said. He, however, did not name the other PSUs which are slated to be shut.