BSNL, MTNL to merge. Cabinet approves Revival package worth ₹ 29,900 Crores

Ending suspense over fate of Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), Narendra Modi led cabinet approves revival package for the ailing firms. Government has decided to merge both firms. MTNL will become a subsidiary of BSNL as of now. Ultimately MTNL will merge with BSNL.

Revival plan includes ₹ 15, 000 Crore infusion via sovereign bonds, a voluntary retirement scheme (VRS) and allocation of 4G airwaves at 2016 prices.

Cabinet has also agreed to ₹ 38, 000 Crore Asset Monetization scheme over next four years, telecom minister Ravi Shankar Prasad said at a press briefing. He also asserted that “neither Neither BSNL nor MTNL will be closed, disinvested or sell, but professionalism will be imbibed at both firms. This will be done to make BSNL-MTNL competitive.

Both BSNL and MTNL have high revenue-to-wage ratio. BSNL has a headcount of 163,000 while MTNL employs 22,000 workforce. Wage to Revenue ratio of BSNL is 70% whereas for private telcos that is near 5%.

Giving an example of the VRS package, Mr. Prasad said any employee above the age of 53 and half, who opts for the VRS, will be given 125% remuneration of the salary, pension and gratuity till the age of 60.

About half of the 176,000 employees at BSNL are estimated to retire in the next five-six years. On other hand MTNL has 22,000 employees. Of this, 16,000 employees with retire in the next five-six years.

The VRS package being considered for BSNL is expected to be around ₹ 6,365 Crores and for MTNL the VRS package could be around ₹ 2,120 Crores.

Government is confident that due to these steps including VRS, asset monetization and allocation of 4G spectrum, both companies will become EBITDA (Earnings before interest, tax, depreciation and amortization) positive.

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