The Union Cabinet on Wednesday approved the revival plan of loss-making firms - BSNL and MTNL -which includes allocation of 4G spectrum with a capital infusion of Rs 20,000 crore and their in-principle merger. The revival and restructuring plan also includes permission to the entities to raise sovereign bonds of INR 15,000 crore, monetize Rs 38,000 crore of assets and roll out a voluntary retirement scheme (VRS) for their employees. The asset monetization of both PSUs will be over the next four years. Pending the merger, MTNL will act as a subsidiary of BSNL till modalities are firmed up.
Former Telecom Secretary Aruna Sundararajan said that the cabinet decision will have a positive impact on the sector and on BSNL and MTNL. He further added that BSNL also will have to see its efficiency goes up, and they have to monetize all their assets, not just the land. The only chance that BSNL has to be a pan-India player is it has to merge with MTNL. They stand a fighting chance now with 4G spectrum, VRS, asset monetization, and merger.
The government has allowed both PSUs to issue sovereign guarantee for long-term bonds of INR 15,000
crore. In another relief to the huge workforce burdened PSUs, the government also announced there will be an attractive VRS and will bear its cost. The 4G spectrum allocation to the PSUs will be done administratively and at 2016 prices. The spectrum will be funded by the Government of India through capital infusion in these PSUs at a value of INR 20,140 crore and in addition, the GST amount of INR 3,674 crore to this spectrum value will also be borne by the Government of India through budgetary resources. By using this spectrum allotment, BSNL and MTNL will be able to deliver 4G services, compete in the market and provide high-speed data using their vast network including in rural areas. Both PSUs will also raise long-term bonds for which sovereign guarantee will be provided by the government and with these resources, the PSUs will restructure their existing debt and also partly meet CAPEX, OPEX and other requirements.
BSNL and MTNL will also offer Voluntary Retirement to their employees, aged 50 years and above through attractive Voluntary Retirement Scheme (VRS), the cost of which will be borne by the Government of India through budgetary support. The ex-gratia component of VRS will require INR 17,169 crore in addition, the government will be meeting the cost towards Pension, Gratuity, and Commutation. Details of the scheme will be finalized by BSNL/MTNL.
The merger will give BSNL access to the lucrative market of Delhi and Mumbai and it will be much better equipped to take on the competition and boost its revenues. The telcos will monetize their assets so as to raise resources for retiring debt, servicing of bonds, network up-gradation, expansion and meeting the operational fund requirements.
VRS was inevitable for both the PSUs as BSNL has 1.76 lakh employees across India while MTNL has around 22,000 employees. The employee cost of BSNL is 75 percent and that of MTNL is 87 percent of their total income.
It is expected that with the implementation of the said revival plan, BSNL and MTNL will be able to provide reliable and quality services through its robust telecommunication network throughout the country including rural and remote areas.
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