BSNL and MTNL get a lifeline with merger

Cabinet OKs revival package for the two loss-making public sector telecom firms.

NEW DELHI:  The Union Cabinet on Wednesday approved a proposal to merge BSNL and MTNL as well as a revival package to restructure debt by raising Rs 15,000 crore through bonds backed by sovereign guarantee, halving the number of employees through a generous VRS scheme, and raising another Rs 38,000 crore by monetising assets over the next four years. “The Cabinet has given in-principle nod to the merger of BSNL and MTNL and till modalities are in place, MTNL will be a subsidiary of BSNL,” Telecom Minister Ravi Shankar Prasad said after the Cabinet meeting.

Dismissing rumours that the two firms might be shut down, the minister said, “Neither BSNL nor MTNL will be closed, disinvested or sold off. Government wants to make them professional.” The two firms will be allotted additional 4G spectrum to enable them to offer broadband and data services. The government will bear the spectrum cost of Rs 20,140 crore as well as GST of Rs 3,674 crore.

“The spectrum allocation to BSNL worth Rs 14,115 crore will be in lieu of (fresh) equity shares and Rs 6,295 crore for MTNL in lieu of preferential shares,” Telecom Secretary Anshu Prakash said. The VRS scheme, by which the government wants to trim employee size as well as costs, is estimated at Rs 29,937 crore.  The ex-gratia component will cost another Rs 17,169 crore. Both will be funded by the government.

“Employees above 53.5 years will get 125% of their salary which they would have earned if they worked till 60,” Prakash said. BSNL has 1.68 lakh employees currently while MTNL’s headcount stands at 22,000.
The distressed telcos’ troubles worsened after the entry of Reliance Jio, which saw telecom rates coming down in an aggressive price war.

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