Centre mulls BSNL, MTNL merger after VRS scheme

The government may look at merging sick telecom PSUs BSNL and MTNL after doling out a voluntary retirement scheme (VRS) to employees of both the firms.

Aiming to finalise the revival of the two ailing telecom public sector units, the committee of secretaries (CoS) will meet on July 4 to take a firm view on the matter.

BSNL offer services across India, except Delhi and Mumbai, where MTNL operates. A merger plan is being discussed by the government for many years. Both the firms have already integrated some of their back-end services to bring in synergies and cut costs.

The listed status of MTNL is one of the biggest hurdles in the merger with BSNL, apart from the different salary structure of both the firms. A BSNL mobile user has to pay roaming charges while travelling to Delhi and Mumbai and vice versa. A single entity would bring in customer convenience as well.

Department of Telecommunications has prepared various revival measures which will be put up before CoS for consideration, according to sources. The sale of assets, including land monetisation, will also be looked into, in order to enable the sick PSUs to overcome the financial crunch that they are in currently.

A revival package that includes VRS and an asset monetisation plan are keys to the revival of both PSUs.

The DoT plans to fund the VRS through the issuance of a 10-year bond. The bonds would be paid back by lease revenue that they will get from land asset monetisation. About 50% of BSNL employees will retire in the next five years and out of 22,000 total MTNL employees, around 16,000 will retire during the same period, which will substantially reduce the headcount.

BSNL had recorded a profit of Rs 10,000 crore in 2005, but slipped to a loss of Rs 7,500 crore last year and for the first time in its history, the company delayed salaries of its employees in February due to the cash crunch.

Due to hyper-competition in the telecom sector, both the firms have been incurring losses for several years. The situation has worsened because of a huge employee cost due to which expenditure has hit the roof while revenues have nosedived. For BSNL, about 55% of its expenditure goes into employee salaries as it has a huge base of 1.76 lakh employees across India. A VRS proposal for Rs 6,365 crore for BSNL is under consideration while another proposal of Rs 2,120 crore for MTNL has been submitted to the government.

The VRS proposal is being considered on the Gujarat model, where an amount equivalent to 35 days of salary for each completed year of service, and 25 days of salary for each year of service left till retirement is offered.

Both the firms have also asked for allotment of 4G spectrum without paying the auction price as they are unable to compete with private telecom players who are rapidly expanding their 4G network and services. The new player Reliance Jio, which shook the telecom industry with its disruptive pricing, has a pan-India 4G network. The data consumption on mobile devices has gone up substantially since the advent of 4G in late 2016 with RJio.

Though the data consumption on mobiles grew substantially, the financials of the incumbents took a hit after the debut of RJio, which also led to consolidation in the telecom sector. Now, only three private players are left, apart from BSNL and MTNL. 

― Zee Media Newsroom