New Delhi: The Cabinet Committee on Economic Affairs on Wednesday gave an in-principle nod to a proposed merger of Mahanagar Telephone Nigam Limited (MTNL) with Bharat Sanchar Nigam Limited (BSNL) in a bid to revive debt-ridden state-run telecom operators.
“The government is neither closing nor divesting stake in MTNL and BSNL,” Union Minister Ravi Shankar Prasad said in a press briefing on Wednesday. The move comes at a time public sector companies MTNL and BSNL are facing financial stress amid intense competition in the telecom sector.
In an official statement, the Cabinet said the plan is expected to enable the two companies to provide reliable and quality services through a robust telecommunication network across the country including rural and remote areas.
To make the proposed joint venture more competitive and professional, the government would raise Rs. 15,000 crore via sovereign bonds, which will be serviced by MTNL and BSNL, Prasad said.
The turnaround plan includes monetisation of assets worth Rs. 38,000 crore owned by the two companies over a period of four years. The move is expected to help the companies raise resources for retiring debt, servicing of bonds, network upgradation and expansion, and for meeting operational fund requirements, the statement said.
The Cabinet also cleared capital infusion of Rs. 20,140 crore in MTNL and BSNL to equip them with additional spectrum which will enable them to deliver 4G services.
The government will bear GST or Goods and Services Tax of Rs. 3,674 crore towards the spectrum through budgetary resources. The allocation of 4G spectrum will allow the firms to compete in the market and provide high speed data using their vast network.
The government also proposed a voluntary retirement scheme (VRS) for MTNL and BSNL employees at the cost of Rs. 29,937 crore. “We are coming with a very attractive VRS package for MTNL and BSNL employees,” Prasad said.
Both state-run telecom firms BSNL and MTNL have been reporting losses since 2010, when they were directed to pay the auction determined spectrum price for all telecom circles in their network.
While MTNL has been continuously posting loss and has showed no signs of revival, BSNL posted operating profits of Rs. 672 crore in 2014-15, Rs. 3,885 crore in 2015-16 and Rs. 1,684 crore in 2016-17.
BSNL’s loss is estimated to be around Rs. 14,000 crore with a decline in revenue to Rs. 19,308 crore in 2018-19. Its losses have risen steadily from Rs. 4,793 crore in 2016-17 to Rs. 7,993 crore in 2017-18, and are estimated to have swollen to Rs. 14,202 crore in 2018-19.
BSNL had submitted a proposal to the government in 2015 seeking approval for a voluntary retirement scheme (VRS) package pending since 2009.
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