BSNL, MTNL to merge under Rs 69,000 cr revival plan; 4G spectrum, VRS part of scheme

The government on Wednesday approved a Rs 69,000 crore revival package for BSNL and MTNL that includes merging the two loss-making firms, monetising their assets and giving VRS to employees so that the combined entity turns profitable in two years.

The Union Cabinet headed by Prime Minister Narendra Modi approved a plan to combine Mahanagar Telephone Nigam Ltd - which provides services in Mumbai and New Delhi - with Bharat Sanchar Nigam Ltd that services the rest of the nation, Telecom Minister Ravi Shankar Prasad said here.

The package approved includes infusion of Rs 20,140 crore capital for purchase of 4G spectrum, Rs 3,674 crore for GST to be paid on spectrum allocation, companies raising Rs 15,000 crore in debt on the sovereign guarantee and government funding Rs 17,160 crore voluntary retirement scheme (VRS) and another Rs 12,768 crore towards retirement liability.

The proceeds of the sovereign bonds issue will be to restructure debt and meet other expenses. The bond will have to be serviced by the PSUs only. The main liability will fall on BSNL as MTNL will now operate as a subsidiary of the company.

The two firms will monetise assets worth Rs 37,500 crore in the next three years, Prasad said.

MTNL has reported losses in nine of the past 10 years and BSNL too has been ringing in loss since 2010.

"Neither BSNL/MTNL is being closed, nor are they being disinvested, nor are they being hived off to any third party," Prasad said. "With all these (measures), I'm confident, BSNL will become EBITDA positive in the next two years."