BSNL And MTNL To Be Merged By July 2015

KOLKATA: The telecom department (DoT) has for the first time set a cutoff date—July 31, 2015—for concluding the much discussed merger of struggling state-run telecom companies, Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd.

In a presentation to Prime Minister Narendra Modi, seen by ET, DoT said it expects to “secure Cabinet approval for the proposed BSNL-MTNL merger by June 30 next year”.

Towards this, it plans to wrap up merger consultations with the unions of BSNL and MTNL by March 31, 2015, and circulate a draft Cabinet note for inter-ministerial consultations by April 30 next year. MTNL runs telecom services in Delhi and Mumbai while BSNL offers telecom coverage in the rest of India.

In the run-up to the proposed merger, DoT has set additional deadlines for concluding pending organisational restructuring initiatives in both the telcos. For instance, it has set a December 31, 2014, deadline for hiving off BSNL’s mobile towers into a wholly-owned arm and also monetising BSNL and MTNL’s property holdings to unlock value for their survival, the minutes of DoT’s presentation show.

BSNL has 61,622 mobile towers, the second largest tower portfolio among all telcos. A sizeable chunk of its tower assets are colocated with landline exchanges to meet business needs.

BSNL is also the holder of one of the largest land banks among state-owned firms with properties reckoned to be running into thousands of crores of rupees across 3,500 towns. It had recently said it hoped to raise nearly Rs 500 crore in the first year from leasing parts of its land holdings and would also offer its telecom factories to contract manufacturers to generate cash in its bid to contain losses.

While BSNL is yet to do a valuation of its countrywide property holdings, MTNL’s land and building assets are pegged above Rs 3,000 crore, according to a senior company executive.

In addition, DoT plans to provide financial support to compensate MTNL for liabilities stemming from its minimum alternate tax (MAT) payout, which is pegged at roughly Rs 780 crore. It also proposes to fund MTNL’s capex needs for expanding its mobile, landline and broadband networks. A top MTNL executive said the company had sought Rs 2,000 crore from DoT for meeting network expansion capex costs over a three-year span.

BSNL and MTNL have an infrastructure-sharing pact for providing joint services to companies. They share assets such as buildings, mobile masts and international longdistance phone networks to service mostly enterprise customers.

DoT’s presentation to the prime minister on the BSNL-MTNL merger road map comes at a time when the Narendra Modi government is trying to revive the two financially stressed telcos, which continue to reel under hefty losses. MTNL posted a Rs 733.2 crore net loss in the quarter to June, while BSNL incurred a Rs 7,085 crore loss in 2013-14.