The BSNL/MTNL merger is off – for now

The BSNL/MTNL merger is off – for now

The situation regarding the merger of India’s state-run telecommunications operators Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) has become a touch more complex.

Despite reports that their financial situation is improving, the merger has now been postponed for financial reasons, according to telecommunications minister Ravi Shankar Prasad, although what he calls “close cooperation and service integration” between BSNL and MTNL has been undertaken.

The timing of this change of plan seems strange given that, according to Indian press reports, both BSNL and MTNL have enjoyed positive earnings before interest, tax, depreciation, and amortization (EBITDA) in the first six months of the current financial year.

It’s now been about 18 months since the announcement of a revival plan in which the government introduced a generous voluntary retirement scheme. It was accepted by 78,300 people and saved BSNL about 50 percent of its total staff costs. The smaller MTNL saw 14,378 employees, about three quarters of its workforce, go with the scheme.

However, while BSNL in particular is saving money, it’s not enough – yet. A report from the Parliamentary Standing Committee on Information Technology suggested that BSNL won’t be profitable for another two years.

It puts this down to failure to monetize land assets (part of the revival plan) and constant delays in 4G network rollout. The committee suggested that BSNL is expected to be “profitable from FY 2023-24” onwards. It’s not clear whether or when the same situation will apply to MTNL.

News reports suggest that monetising BSNL’s physical assets could bring in Rs 67,837 crore (about $9.3 billion). MTNL’s assets could be worth Rs 17,985 crore ($2.5 billion). That, however, rather depends on land and rent prices; land prices have fallen in the past year. 

Surprisingly perhaps, a lot of promised 4G spectrum has not yet been used by BSNL or MTNL, especially given that some private companies are already looking at 5G. The apparent insistence on encouraging BSNL as a vehicle for Indian telecom equipment hasn’t helped as there don’t appear to be Indian companies able to take on 4G equipment supply and rollout.

However, more 4G spectrum has been allocated to both operators and will soon be provided. Now all they need to do is to get the 4G equipment, offer 4G services to more customers and sell some assets and hopes of profitability may yet prove true.

 

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