India’s BSNL and MTNL now unlikely to merge

India’s BSNL and MTNL now unlikely to merge

It’s been a little more than 15 months since we reported that two major Indian service providers were to merge. Now it looks like the merger – between fixed and mobile service providers Mahanagar Telephone Nigam Ltd (MTNL) and Bharat Sanchar Nigam Ltd (BSNL) – has been shelved.

Indian press reports say that a six-member Indian group of ministers has apparently recommended that the merger would neither be beneficial nor feasible. The Union Cabinet, however, will have to make the final decision on this.

The issues  of MTNL’s high levels of debt and merging the salary structures of the two organisations were said to have been factors in abandoning the merger.

Until recently MTNL served the Delhi and Mumbai circles (administrative sub-districts) and BSNL provided services to the rest of the country. However, less than a month ago we reported that, in the latest step towards a full merger between the two state-owned operators, BSNL had assumed control over the Delhi and Mumbai mobile networks of its sister firm MTNL. Pending a 4G spectrum award, BSNL is also expected to launch 4G services in the Delhi and Mumbai circles.

Press reports suggest that BSNL and MTNL both hold a telecom market share of close to 10.75 percent. It should be noted, however, that BSNL is the largest wireline telecommunications network company in India.

What will now happen to the massive revival package for BSNL and MTNL, estimated at about $9.7bn, is not known.

The original plan was to merge the two loss-making firms, monetising their assets and offering a voluntary retirement scheme to employees. The plan was that the new company would be profitable within two years. Both business have been loss-making for all or most of the past decade.

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