BSNL’s Chairman and Managing Director PK Purwar took additional charge of MTNL, the state-owned telco said yesterday in a BSE filing. ET Telecom first reported the move on 14 April. Purwar’s appointment seems to be a step towards the eventual merger of MTNL and BSNL, announced in October 2019. This isn’t Purwar’s first time heading MTNL — he was appointed thrice as the telco’s CMD in a temporary basis in 2014, 2016, and 2017. Purwar was appointed for a five year term in 2017, but gave up the post in 2019 after being appointed as BSNL’s CMD.
Telecom infrastructure association TAIPA wrote to Purwar on 11 April asking that the state-owned telcos’ dues to tower companies be paid immediately.
The nod for a BSNL–MTNL merger follows a 2017 parliamentary report that recommended it as a way for the struggling state-owned telcos to survive the onslaught of competition that they’re unable to weather. Especially since Jio’s entry in 2016, the state-owned telcos have been struggling, especially as they were already in a weaker financial position than Vodafone, Idea and Airtel at the time of Jio’s entry. (Read our summary of the parliamentary report.)
Four steps for MTNL-BSNL revival
The union cabinet has provided a four-way revival plan for BSNL and MTNL.
- Allotment of 4G spectrum: The government has approved the administrative allotment of 4G spectrum services to BSNL and MTLNL which will enable them to provide broadband and other data services. It will be funded by the central government by capital infusion of Rs 20,000 Crores. The centre will also bear the GST amount of Rs 3,674 crore through budgetary resources.
- Telcos to raise long-term bonds: BSNL and MTNL will raise long-term bonds of Rs 15,000 crore for which sovereign guarantee will be provided by the central government. BSNL and MTNL will also restructure their existing debt and meet the capital expenditure, operational expenditure and other requirements.
- Voluntary retirement for employees: BSNL and MTNL will offer voluntary retirement (VR) to their employees who are aged above 50 years through VR scheme, the cost will be born by the central government through budgetary support. The ex-gratia component of VRS will require additional funds of Rs 17,169 crore. The government will also meet the cost of pension, gratuity, and commutation.
- BSNL and MTNL to monetise the assets: The telecom companies will monetise their assets so as to raise resources for debts, servicing of bonds, up-gradation of network, expansion, and meeting operational fund requirements. Both the companies have collected debt of Rs 40,000 crore.
Opposition by Finance Ministry: The Finance Ministry had previously opposed any financial backing to BSNL and MTNL and said that any upfront cost support to them would be a huge burden on the budgetary resources of the government. Also, Department of Telecommunication is seeking comments from the Finance Ministry on the cabinet memo circulated to the nodal ministries in regards to the merger.