Loss-Making Telecom Firms BSNL and MTNL to be Merged as Part of Revival Package, Says Centre

New Delhi: The government on Wednesday approved a Rs 68,751-crore revival package for loss-making BSNL and MTNL, including 4G spectrum allocation and voluntary retirement scheme, as well as their merger.

The Union Cabinet also approved merger of the state-owned telecom firms and till the completion of the process, MTNL will operate as a subsidiary of BSNL, Telecom Minister Ravi Shankar Prasad said here while sharing details of the revival package.

The package includes raising of 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 interest of lakhs of employees of these PSUs," Prasad said.

BSNL has around 1.68 lakh employees and MTNL around 22,000. "The VRS is voluntary; nobody can be forced to opt for it," Prasad said.

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 the companies have been demanding spectrum 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," 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.

Meanwhile, MTNL Chairman and MD, Sunil Kumar, expects the telecom firm MTNL to be operationally profitable within two years

Kumar 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 told PTI.

The government has approved a Rs 68,751-crore revival package for loss-making BSNL and MTNL, including 4G spectrum allocation and voluntary retirement scheme.

The Cabinet also approved merger of the state-owned telecom firms and till the completion of the process, MTNL will operate as a subsidiary of BSNL, Telecom Minister Ravi Shankar Prasad said here while sharing details of the revival package.

The company had posted loss of Rs 3,388.07 crore and revenue of Rs 2,085.41 crore in 2018-19. The total debt on the company is around Rs 20,000 crore. The finance cost of MTNL was around 50 per cent of the revenue.

Out of the total Rs 69,000 crore, MTNL is estimated to get Rs 4,000 crore for VRS and around Rs 7,000 crore from the sovereign guarantee bonds. The government has set deadline of January 31, 2020 for BSNL and MTNL employees to opt for VRS.