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Cabinet clears: Rs 70,000 crore plan to revive BSNL, MTNL
New Delhi: The government has approved a Rs 70,000 crore-plus package
for reviving BSNL and MTNL that involves merger of the two state-run
telecom operators and a voluntary retirement scheme.
The Cabinet Committee on Economic Affairs (CCEA) on Wednesday
approved the revival package that includes raising Rs 15,000 crore via
government-guaranteed bonds, allocation of 4G spectrum worth Rs 20,140
crore, and a Rs 38,000-crore asset-—mainly land bank—monetisation plan
over four years.
“These two firms are strategic assets of the nation as they form
backbone of the critical communications infrastructure,” communications
and IT minister Ravi Shankar Prasad said. “So, we will not close them or
disinvest in them, but revive them and make them competitive.”
A group of ministers will be formed to help implement the revival
plan, he said. “All efforts will be towards making the merged entity
Ebidta positive within the next two years and profitable from thereon,”
Prasad said.
Mahanagar Telephone Nigam
Ltd, a listed company that operates in Mumbai and Delhi, will be
delisted and merged into the unlisted Bharat Sanchar Telephone Nigam
Ltd, which has operations in the rest 20 telecom circles. Till the time
of the merger, MTNL will run as a subsidiary of BSNL.
Analysts said the merger move makes sense, but doubted if the move would help the telco be competitive in a brutal market.
"In fact, it (the merger) is long overdue,” said Mahesh Uppal,
director at telecom consultancy firm Comfirst India. “The plan to treat
MTNL as a subsidiary of BSNL till it is merged is also a good idea
because they really are very natural bedfellows,” Uppal said. “I think
an attractive VRS provision is a good idea, as is the plan to inject
some capital into these companies.”
Prasad said the government will put in Rs 29,937 crore towards the
voluntary retirement scheme. “Employees over 53 and a half years of age
will be eligible for this,” he said.
“And let me clarify, this will be completely on voluntary basis. Nobody will be compelled to opt out.”
More than half of the employees of the two state-run telcos fall in
this age bracket, and salary expenses use up more than 75% of revenues
of these firms. In comparison, their private rivals spend less than 5%
of their revenues on salaries.
Prasad said the government will raise Rs 15,000 crore through sovere
sovereign bonds. The money could be used to refinance debt that amounts
to about Rs 40,000 crore. “Assets worth Rs 38,000 crore will also be
monetised in four years,” he said.
The minister also announced that 4G spectrum will be allocated to
BSNL and MTNL at 2016 prices. “Further, the GST on the bandwidth which
comes to around Rs 4,000 crore will also be adjusted by the government,”
he said.
MTNL and BSNL are currently struggling to compete with private rivals Vodafone Idea, Bharti Airtel and Reliance Jio.
Just over a decade ago, BSNL’s annual revenues were around Rs 40,000
crore, and its net profits were robust, in excess of Rs 3,000 crore.
Today, it’s weighed down by accumulated losses upwards of Rs 57,500
crore since FY10.
Worse, it’s likely to have reported a whopping Rs 14,000 crore loss
in FY19, which would take its accumulated losses upwards of Rs 71,500
crore.
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