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Government thinking of merging BSNL-MTNL for their survival

A Delayed Imperative : On BSNL-MTNL Merger 

The move to revive BSNL and MTNL and merge them comes at a crucial time for the industry.

The cabinet's approval this week for a plan to revive the loss-making public sector telecommunication providers Bharat Sanchar Nigam Ltd. (MTNL) has come not a moment too soon. from having been monopoly providers of telephone connectivity,the state-run telcos have had to contend with sweeping change since the opening up of the industry to private player and entry of wireless telephony in the 1990s . In just over to decades , the mobile phone revolution has catapulted India to the second rank in terms of wireless subscribers, with only china ahead. But the radical transformation of the industry landscape -wrought by the runway growth in user numbers, rapid technological advances and bruising competition-has come at a substantial price.
The private sector saw the relatively older, large firms using mergers and acquisitions to consolidate as smaller rivals found themselves unable to cope with bitter tariff wars and the capital co
st of bidding for spectrum and upgrading their technologies . BSNL, for its part, was saddles with the legacy of having been a large-scale provider of jobs as well as state-mandated connectivity to remote corners of the country. It is in the fulfillment of the  state's social objectives that the public sector enterprises racked up substantial costs, which the center's revival plain aims to help address.

The proposal includes the allotment of critical spectrum to the two PSEs for offering fourth-generation wireless services, including broadband. The Center will fund the spectrum's cost through an infusion of rs 20,140 crore of capital while also bearing the related GST levy of Rs 3,674 crore. And besides providing a sovereign guarantee on Rs 15,000 crore of long terms bond, which would help the firms restructure debt and partly fund expenses, the government will extend budgetary support of Rs 17,169 crore for ex-gratia payments on a crucial voluntary retirement scheme. A lot will hinge on this VRS plan given that BSNL's workforce of over 1,65,000 employees end up cornering about 75% of the telco's total income. The Cabinet has also given an 'in-principal' nod for the two PSEs to merge, a move that would add market heft to the merged entity. A successful revival of BSNL will have far-reaching implications for the industry this at a time when two of the three surviving private players are faced
with not only sliding market share but a government bill of about Rs 75,000 crore following the loss of a legal challenge. The reach of its network, especially in remote parts, makes BSNL a "strategic asset" that has national security implications given its role in serving the armed forces and responding to natural disaster. The revival plan, even if years late, is a clear recognition by the government of this indisputable fact.

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