BSNL-MTNL merger: What it means
A Rs 69,000-crore revival package for the two is on the table
- Published 23.10.19, 10:57 PM
- Updated 23.10.19, 10:57 PM
- 3 mins read
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 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 operate as a subsidiary.
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 (which is a measure of a company's operating performance) positive in the next two years."
The total debt on both the companies stood at Rs 40,000 crore, of which half of the liability is on MTNL alone, which operates in Delhi and Mumbai.
Both companies have been demanding spectrum to start 4G services to remain competitive in the market.
Telecom secretary Anshu Prakash said spectrum will be allocated to both the companies administratively within a month.
"The spectrum allocation to BSNL worth Rs 14,115 crore will be in lieu of equity shares and about Rs 6,295 crore for MTNL in lieu of preferential shares," Prakash said.
The government will monetise MTNL and BSNL assets worth Rs 37,500 crore over a period of three years.
"The assets primarily include land assets but also rental and leasing of their buildings. MTNL has around 29 retail outlets in Delhi alone," Prakash said.
He said BSNL will also need around Rs 10,000 crore to roll out 4G services in phases and MTNL around Rs 1,100 crore.
"The debt on BSNL is the lowest. They can raise capital expenditure required for rolling out network from the banks and bringing in efficiency in their operations," Prakash said.
BSNL chairman and managing director P.K. Purwar said the company has plans to roll out 60,000 mobile sites for 4G services across India for an estimate cost of up to Rs 7,200 crore in next 12-15 months.
MTNL CMD Sunil Kumar said the company has plan to roll out 9,750 mobile sites for 4G services in Delhi and Mumbai. "Employees above the age of 53.5 years will get 125 per cent of their salary which they could have earned in balance period of their service," Prakash said.
Employees in the age bracket of 50 to 53.5 years opting for the VRS will get benefit in the range of 80 to 100 per cent of the remuneration to be paid in the balance period of their service.
MTNL CMD said the voluntary retirement scheme approved by the government is very lucrative for the employees, and he expects all the 15,000 employees eligible for it will take it.
"It is a very path-breaking decision by the government. The VRS is very lucrative for all the eligible employees. This will bring down our employees cost to 25 per cent of revenue from 85 per cent at present by February. We expect to be EBIDTA positive within 2 years due to this step," Kumar said.
The government has set January 31, 2020, as the last date for employees opting for VRS to be in office.
BSNL engineers and account professionals body AIGETOA (All India Graduate Engineer Telecom Officer Association) appreciated the step taken by government. "We whole heartedly extend our thanks to your (Prime Minister Narendra Modi) goodself for the best decision you have taken in the interest of BSNL and India. We affirm our firm support to the revival measures and we assure to give best service to our customers," its president Ravi Shil Verma said.