India's DoT may revive BSNL-MTNL merger

India's DoT may revive BSNL-MTNL merger

Dylan Bushell-Embling

India's telecom ministry has revived a proposal to merge state-owned operators BSNL and MTNL, in the wake of the companies' continuing weak financial performance.

The Department of Telecom has prepared a draft note covering the merger of the two companies, and sent the proposal to new communications minister Ravi Shankar Prasad for approval, the Hindustan Times reported.

If the minister signs off on the draft, the plan will be sent to the finance ministry and then to cabinet for final approval.

The ministry has formed working groups to study various operational aspects of a merger, including human resources, technological systems and corporate integration.

As part of the restructuring the ministry has proposed to spin off BSNL's tower assets into a separate, 100%-owned subsidiary responsible for operations, maintainence, sales and marketing of the towers.

A merger proposal has been revived due to the continuing poor performance of the two companies – according to their unaudited results, BSNL is expected to post a net loss of 70.84 billion rupees ($1.17 billion) for the FY13-14 financial year, while MTNL will report a loss of 19.08 billion rupees.

The government has been debating for years whether to merge the two companies. In 2011, India's Board for Reconstruction of Public Sector Enterprises strongly recommended a merger between BSNL, MTNL and state-owned telecom equipment maker ITI.

But the merger plans stalled due to complicating factors including opposition from workers' unions.