InvestorQ : Why the BJP Government thought of merging BSNL-MTNL? This will help for the investors like me?
Chandralekha Desai made post

Why the BJP Government thought of merging BSNL-MTNL? This will help for the investors like me?

Answer
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Khushi Patel answered.
11 months ago


As an investor, there are some important things you need to know about the BSNL MTNL merger. Here are the highlights.

Since both the companies were in a deep cash crunch and were delaying payment of salaries to nearly 1 lakh workers, the government decided to intervene and bail out the companies to protect jobs to the extent possible.

The total bailout will be to the tune of Rs.70,000 crore of which the biggest chunk will go towards offering an attractive voluntary retirement service (VRS) package to employees of BSNL and MTNL.

In addition, the government will also look to raise nearly Rs.35,000 crore by monetizing some of the critical assets of the two companies including property, land parcels, spectrum, etc. This will be used to retire the debt of the two companies.

As part of the bailout package, MTNL will become a subsidiary of BSNL and would most likely cease to exist as a separate entity. Currently, MTNL provides telephone services only to Mumbai and Delhi while it is BSNL that provides the service to the rest of India.

Once the merger is done, debt reduced and VRS initiated, the next challenge will be to make the government telecom company competitive and this will be down by allowing them some special concessions in the allocation of spectrum, payment of fees and grant of licenses.
As an investor, the good news for you is that the uncertainty over the future of the company is finally over and they now will have the capacity to compete with the other private players on a firmer footing.