In a Lok Sabha reply (pdf), Minister of Communications Manoj Sinha said that “there is no proposal for merger of BSNL and MTNL”. The Department of Telecommunications (DoT) has instead classified MTNL as a ‘weak central public sector enterprise’ and has initiated revival/restructuring/closure road map for MTNL. The development comes after the parliamentary committee on petitions recommended a merger of BSNL and MTNL in Lok Sabha in March.

The committee had however pointed out that financial support from the government won’t work for both PSUs since the “aspect of providing financial support to these entities by the Government has proved to be an apparatus for ‘survival’ and not ‘revival’.” Note that MTNL operates only in Delhi and Mumbai, while BSNL operates in all other circles.

Why MTNL and BSNL are posting continuous losses:

BSNL’s losses for the first half of 2016 (up till 30th June 2016) stood at Rs 1,721 crore. Its losses for the first half of 2016 has already covered 44% of the losses it posted in the previous financial year (FY 2015-16): Rs 3,880 core. On the other hand, MTNL reported a net loss of Rs 634.8 crore for the quarter ended March 2017 (Q4-FY17).

According to Communication Minister Manoj Sinha’s reply both PSU’s financial condition has been affected due to:

  • High load of spectrum fee payments to Govt: For the 3G and BWA (Bandwidth Wireless Access) spectrum that MTNL acquired in 2010, it has to pay Rs.11097.97 crore to the government. While BSNL owes 18500.38 crore to the government for the same spectrum allocated to it in 2010. The cost of these payments has “eroded their reserves. MTNL had to take the loan to meet this expenditure,” Sinha said.
  • High labour/employee costs: Sinha added that “both PSUs (BSN, MTL) are also burdened with salary payments [to inherited] DoT employees, who are now working as absorbed employees in these PSUs.”
  • Rising Competition: Market dynamics of the telecom sector has changed in last 5 to 6 years “because of the entry of more number of operators, which have covered major market share and put a lot of pressure on the revenues”. BSNL’s wireline broadband services market share declined to 15.67% in December 2015 from 29.96% in December 2013. For the same period, MTNL’s broadband market share declined to 1.25% from 3.19%.
  • Slow adoption of new infrastructure, and other delays: “Both the PSUs could not invest timely in upgradation of their infrastructure… [they] have to follow prescribed guidelines and procedures which sometimes leads to inherent delays,” Sinha said in his reply.

What the govt is doing to ease stress on BSNL and MTNL