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Saturday, Nov 23, 2019

In revival plan for MTNL and BSNL, cabinet announces merger of the two

Telecom minister Ravi Shankar Prasad made the announcement and assured that neither MTNL or BSNL are being closed, nor being disinvested, nor being hired to any third party.

india Updated: Oct 23, 2019 17:45 IST
HT Correspondent
HT Correspondent
New Delhi
During the process of the merger, MTNL will act as a subsidiary of BSNL.
During the process of the merger, MTNL will act as a subsidiary of BSNL.(REUTERS file photo)
         

The Union Cabinet on Wednesday decided to merge state-owned telecom firms Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL). Telecom minister Ravi Shankar Prasad made the announcement and assured that neither MTNL or BSNL are being closed or being disinvested.

“BSNL and MTNL will be merged and the government will put in Rs 29,937 crore for revival of the companies,” he said.

The central government’s revival package for the two firms includes raising of Rs 15,000 crore sovereign bonds and monetising Rs 38,000 crore of assets in next four years. During the process of the merger, MTNL will act as a subsidiary of BSNL.

Prasad said voluntary retirement scheme (VRS) will be offered to employees to cut cost. The minister said 125% payout of salary, gratuity and pension over the remaining years of service would be given to employees if they opt for VRS at the age of 53 and a half years. He said around a half of the employees so fall in that age bracket.

The telecom minister said the merger is aimed at making the telecom firms “more competitive and bring in professionalism”. According to the Telecom Regulatory Authority of India (TRAI), the market share of BSNL and MTNL is less than 10%.

Both BSNL and MTNL are loss-making companies.BSNL has a staff 1.76 lakh on its rolls and the company has posted a net loss of ₹13,804 crore in fiscal 2018-19. The company has been making losses continuously since 2009-10 and has been declared ‘incipient sick’. MTNL, which has around 22,000 employees, has also been witnessing continuous losses over the last few years.

While MTNL is largely present in Delhi and Mumbai, BSNL has a wider network. TRAI data says BSNL had 116 million subscribers in August.

The state-run firms are struggling to target new customers with private players like Reliance Jio, Bharti Airtel and Vodafone Idea offering lucrative deals.