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BW Businessworld

Will The Marriage Work?

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After being planned for years, the merger of state-owned telecom operators Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) is finally going to happen. The Modi government is looking to complete the process by mid-2015.

And it is not hard to see why. Both companies have been losing subscribers and market share. While India’s total mobile subscriber base rose from 898 million (March 2013) to 933 million (March 2014), the combined subscriber base of the two operators fell from 130.61 million (market share of 14.49 per cent) to 120 million (12.87 per cent) during the period.

But, will the merger work? There are several issues that need to be sorted out for the merger to work.

There is great opposition to the merger within BSNL, where the employees are opposed to the corporatisation of the entity.

Both entities are bleeding. BSNL notched up losses of Rs 7,884 crore on revenues of Rs 27,128 crore during 2012-13 while MTNL recorded losses of Rs 5,321 crore on revenues of Rs 3,428 crore. This January, the government provided some relief when it agreed to refund the Rs 11,258 crore that the operators had paid to acquire 4G spectrum in 2010. BSNL paid Rs 8,314 crore and MTNL Rs 4,534 crore to acquire the spectrum. Besides, the two entities have a combined debt of Rs 21,208 crore on their books.

Their troubles are compounded by the fact that between them, they have 2.97 lakh employees. In the case of MTNL, employee benefits at Rs 4,901 crore exceed revenues by a huge margin. In BSNL, employee benefits are at Rs 13,757 crore.

For this merger to work, the government first needs to get the employees on board. This is what the HR managers in both operators are working on.

Meanwhile, MTNL has proposed selling a 50 per cent stake in its subsidiary Millennium Telecom to BSNL as part of the government’s Digital India plan. The idea is to unlock efficiency since Millennium Telecom will have a marginal licence fee payout since it is not a licensed telecom operator.

It remains to be seen if this government can manage to do something that others have failed to do. But for the new entity to succeed it needs functional autonomy. Will DoT allow that?

(This story was published in BW | Businessworld Issue Dated 06-10-2014)