The union cabinet has approved the revival package for the ailing public sector telecom companies Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL).
A massive Rs 70,000 crore package has been announced for the proposed merger, according to media reports.
“BSNL and MTNL are strategic assets of India. They will not be closed or disinvested or hived off to any third party,” telecom and IT minister Ravi Shankar Prasad said immediately after the approval of the package by the cabinet chaired by Prime Minister Narendra Modi.
The reverse merger will see the listed MTNL become a subsidiary of BSNL.
The revival package consists of administrative allotment of spectrum for 4G services, debt restructuring by raising of bonds with a sovereign guarantee, reducing employee costs, monetisation of assets and in-principle approval of the merger of BSNL and MTNL, according to a statement released by the Press Information Bureau.
Here are six points you need to know about the relief package:
- Rs 15,000 crore infusion in sovereign bonds to be serviced by BSNL and MTNL will help the merged entity.
- The entity will be allocated 4G spectrum at 2016 prices in addition to the government bearing the GST amount of Rs 3,647 crore for the spectrum value. The union cabinet also approved capital infusion of Rs 20,140 crore in MTNL and BSNL to equip them with additional spectrum that will enable them to deliver 4G services.
- The minister in his statement said BSNL is expected to become EBITDA positive in two years. The finance ministry had previously opposed any financial backing to BSNL and MTNL stating that it will be a huge burden on budgetary resources.
- Employees above the age of 50 in both the firms will be offered a generous VRS package with an advance salary of ten years and pension benefits. It will cost the government an estimated Rs 30,000 crore. BSNL has 1.16 lakh employees over the age of 50 out of overall strength of 1.65 lakh. For MTNL, the number is 19,000 in an employee pool of 21,679.
- BSNL is yet to pay employee salaries this month, and it has a monthly bill of Rs 850 crore on this count. BSNL had an estimated loss of Rs 14,000 crore in 2019. The total accumulated debt of BSNL and MTNL stands at about Rs 40,000 crore.
- Given that MTNL is a listed entity, the whole process will take some more time. Until then, MTNL will work as a subsidiary of BSNL.