BSNL-MTNL merger best option for both, says Kuldeep Goyal

May look at VRS later

A merger between state-run telecom firms Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) is the best option because it would create the country’s largest telecom company, said Kuldeep Goyal chairman and managing director of BSNL.

“The merger would also help synergise operations of both the telecom companies,” Goyal said in an interview to Business Standard.

Goyal, however, said the preference for a merger was his personal view. The Department of Telecommunications and boards of both companies had discussed the issue many times, but never come to a conclusion.

He added that he was not worried if the merger did not take place. “We have initiated plans to create synergy between both the companies, like joint go-to-market procedures,” he said.

A merger would create a behemoth with a turnover of over Rs 39,000 crore, higher than its nearest rival Bharti Airtel at around Rs 37,000 crore. It would, however, have around 52 million subscribers compared to Bharti Airtel’s over 100 million.

In the decades before telecom services were liberalised, the government provided all-India services through the department of telecom. MTNL was spun off as a separate entity in 1986 to focus on the fast-growing cities of Mumbai and Delhi.

In 2000, the government decided that BSNL would offer pan-India telecom services, except in Delhi and Mumbai. This has created issues for both companies. MTNL, for instance, finds itself restricted to two major cities, with limited scope for expansion. It has a 1.3 per cent market share of mobile GSM services, the fastest-growing segment of the telecom market.

BSNL, on the other hand, has been considering an initial public offer to raise over Rs 10,000 crore to fund its GSM expansion, a move its unions have opposed. Its alternative is to find a global investor for a strategic minority stake.

BSNL’s revenues fell 21 per cent in 2008-09 to Rs 11,505 crore from Rs 14,499 crore recorded in the previous year, according to a statement made by Minister of State for Communications and IT Gurudas Kamat in the Rajya Sabha.

Goyal conceded that revenues have fallen but said it was taking key initiatives to arrest the fall.

The plan includes sharing towers and the optical fibre backbone with competitors, venturing into new businesses like managed networks and providing IT services like security (firewalls) and managed network services to other companies. BSNL is also venturing into Virtual Private Network (VPN) operations for which it is tying up with international companies like Cable&Wireless, British Telecom, BCCW Hong Kong and NTT DoCoMo.

On the question of offering a voluntary retirement scheme (VRS) to reduce its workforce of 2,79,000 employees, Goyal said at the moment there are “no active proposals under consideration”, but the company might looking at staffing after the restructuring exercise is over. “If there is a need for VRS, we will come out with one and talk to the employees,” he added.