Actually, it is going to be a fairly complicated transaction. Here is how it will work out, as per the government. To begin with, the government will transfer its 56.89% shareholding in MTNL to BSNL. That has already been communicated to the stock exchanges. The debt in the books will be restructured through the issue of Rs.15,000 crore of sovereign bonds. The idea is that this merger will give the combined entity size and scale to take on competition. Currently, MTNL provides telecom services to Mumbai and Delhi, while BSNL provides to the rest of India.

As part of the restructuring, the employees above 55 will be offered VRS but pension will be commuted at 60 only. For those less than 55, it will be commuted in the 6th year. In addition, the good news is that the DOT will allot spectrum to BSNL/MTNL for providing 4G services through capital infusion by the government. The payment of GST on the spectrum cost will be paid through budgetary support. This will be a boost to the combined entity. The combined company will also monetize non-core assets including divestment of land, building, tower and fibre networks.

The MTNL stock will be combined to be listed as the new entity but the stock swap and other ratios still have to be worked out. Most likely, this should give a chance to these two companies at the time when all players other than Jio are struggling. It could turn out to be a value bet in the future.