DoT working on proposal for MTNL, BSNL merger; final call by Cabinet: Source

The Department of Telecommunications (DoT) is "working on" a proposal for merger of cash-strapped BSNL and MTNL as part of efforts to revive the ailing state-owned telecom firms, a source said.

The source, privy to the development, said merger is "one of the many components" of the overall revival plan being worked out for the two corporations, and that a final call on the matter will be taken by the Cabinet.

The move assumes significance as the distressed telecom PSUs Mahanagar Telephone Nigam Ltd (MTNL) and Bharat Sanchar Nigam Ltd (BSNL) have been making losses and have faced challenges in clearing staff salaries in the recent past.

"Merger is one of the many components of the overall revival plan because clearly MTNL cannot stand by itself. Finally, the Cabinet has to take a view on that," the source said adding that the plan entails MTNL being merged with BSNL. MTNL provides telephony services in Delhi and Mumbai, while BSNL is present in the rest of the circles.

The DoT is preparing a rescue plan for MTNL and BSNL in the form of a revival package that entails components like voluntary retirement scheme, asset monetisation, and allocation of 4G spectrum.

BSNL's loss is estimated to be around Rs 14,000 crore with a decline in revenue to Rs 19,308 crore during 2018-19. The public sector firm's provisional loss was Rs 4,859 crore in 2015-16, Rs 4,793 crore in 2016-17, Rs 7,993 crore in 2017-18 and is estimated to swell to Rs 14,202 crore in 2018-19, according to information presented in Parliament.

The total number of employees of BSNL stands at 1,65,179 and the total employees' cost is a staggering 75 per cent of the total income of the company. Contrast that with Airtel, which has 20,000 workers and the employees' cost is 2.95 per cent of the company's income or Vodafone with 9,883 employees that has the cost pegged at 5.59 per cent.

The net worth of BSNL stood at Rs 34,276 crore (unaudited and provisional), while MTNL had a negative networth of Rs 9,735 crore as on April 1, 2019.

Communications Minister Ravi Shankar Prasad had last month told the Lok Sabha that there is no proposal to close the state-run telecom companies and that a comprehensive plan for their revival is under preparation.

Prasad has, in the past, acknowledged the role of the two state-owned corporations in maintaining a "sober equilibrium" in the market, but at the same time has sent out a strong message to them that they will have to "become professional".

"Let my message clearly go to these two PSUs... It is in national interest that they remain healthy, we are working on that... But, they also need to become professional. While I will work towards their revival, they will have to respond with professional attitude," Prasad had said on June 3, soon after assuming charge of the new telecom portfolio.