Ailing BSNL, MTNL to merge

The Asian Age.

Business, Companies

The Modi administration’s aim is to leverage the spectrum allotment to make BSNL and MTNL compete more effectively in the domestic telecom market.

The merger would include the allotment of 4G services at 2016 prices to the two companies with the costs borne entirely by the Central government.

New Delhi: Aiming to revive its two loss making telecom arms, Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), the government on Wednesday decided to merge the two ailing firms as part of a Rs 68,751-crore revival package which includes 4G spectrum allocation, raising sovereign bonds, monetising assets and voluntary retirement scheme for employees.

Till the completion of the merger process, MTNL will operate as a subsidiary of BSNL, telecom minister Ravi Shankar Prasad said while addressing a press conference.

Sharing details of the revival package, he said that it includes raising Rs  15,000 crore sovereign bonds to meet the immediate capital requirement of both the companies, 4G spectrum allocation worth Rs 20,140 crore, Rs 29,937 crore for VRS covering 50 per cent of their employees, and Rs 3,674 crore for goods and services tax that will be levied on allocation of radiowaves.

“In case of BSNL and MTNL, the government’s view is clear. These are strategic assets of India. The entire army network is maintained by BSNL. The VRS package approved by the Cabinet will give eligible employees 125 per cent of income that they would have earned by serving the company till the age of 60 years. With this decision, we have taken care of the interests of lakhs of employees of these PSUs,” Mr Prasad said.

BSNL has around 1.68 lakh employees and MTNL around 22,000. “The VRS is voluntary and nobody can be forced to opt for it,” the telecom minister said.

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The total debt of both the companies stood at Rs 40,000 crore, of which half is owed by MTNL alone that operates in Delhi and Mumbai. Both the companies have been demanding spectrum Rs 69K cr revival: BSNL, MTNL to merge to start 4G services to remain competitive in the market.

Telecom secretary Anshu Prakash said the 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,” he added.

The government will monetise MTNL and BSNL’s 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,” Mr 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,” the telecom secretary elaborated.

In the VRS package, the government has approved Rs 17,169 crore as ex-gratia component and Rs 12,768 crore for preponement of pensionary benefit.

“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,” the secretary 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.

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