Appearances Can be Deceptive: On MTNL & BSNL Merger

Government announced a merger between the state-owned telecom companies Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd to revive the debt-ridden telecom operators. This includes Rs15,000 crore infusion via sovereign bonds, a voluntary retirement scheme (VRS) and allocation of fourth-generation (4G) airwaves, besides an eventual merger of the two loss-making state-run operators.

From the outside perspective, the idea of integrating BSNL and MTNL sounds appropriate. But if we look closely, there is so much more to it. Merging doesn't solve the core issues of weak competitiveness and poor accountability of business. “4G spectrum will be allocated administratively at 2016 prices,” Prasad said, and added that the government will pay Rs 4,000 crore from the budget provision towards spectrum expense. But if we think about it, it’s been 5 years since telecom companies have come up with 4G services. It would be inane to come up with a 4G network when 5G is nearly here and hopes to revolutionize the way we live. No customer would shift to this service when all the private telecom companies are offering the same and with even more affordable prices.

In revenue terms, BSNL-MTNL share in the access services is 7.6%, lower than its 10.3% customer share. Financially, the two companies are in dire straits. Both the companies, MTNL and BSNL are overstaffed. BSNL is running cumulative losses of about Rs 32,000 crore in the last few years, and is finding it difficult to pay salaries to its 1.76 lakh employees. Experts argue that this situation is beyond repair and amalgaming won’t be the logical solution. The government will invest Rs 29,937 crore in this stimulation plan with the combined assets of the two companies worth Rs 38,000 crore to be monetized. The ailing companies will raise a sovereign bond of Rs 15,000 crore for their revival.

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