BSNL, MTNL told to combine operations

Dylan Bushell-Embling
17 May 2011

Indian state-owned operators BSNL and MTNL will meld operationally if not structurally following a government edict.

The telecom ministry has asked BSNL and MTNL to synch their operations and function as one pan-Indian operator while it sorts out issues merging the two companies, the Economic Timesreported.

Under the current situation BSNL is unable to operate in Delhi or Mumbai, the two most lucrative telecom circles, while MTNL cannot expand outside of these areas. BSNL offers fixed-line and mobile services in all remaining circles.

But the companies have been directed to sort out a means of operating in tandem as a nationwide service provider even if they remain separate entities.

The government has for years been considering the possibility of merging the lossmaking companies into one as a means to improve profitability, with the most recent suggestion being to combine the pair with state-owned telecom equipment maker ITI.

But there are a number of practical problems holding up a structural combination, including differences in shareholder, staffing and salary structures, telecom secretary R Chandrasekhar told ET.

BSNL has long been unprofitable, posting a net loss of 18.23 billion rupees ($403.8 million) in the financial year ending in March 2010. India's prime minister in January appointed a high-level committee to explore ways to improve BSNL's performance.

MTNL last week reported a loss of 28.26 billion for 2010-11, but revealed it had cut its loss for the March quarter by 30% year-on-year to 10.99 billion rupees.

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