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Thursday, November 12, 2015

DoT plans new holding company for BSNL, Ashok Hindocha M-94262 54999

DoT plans new holding company for BSNL, MTNL

Mansi Taneja  |  New Delhi 
The department of telecommunications (DoT) is actively considering setting up a holding company, with state-run telecom companies Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) as its subsidiaries. The move is expected to revive the ailing public sector undertaking companies, by synergising their operations.

This is one option recommended by IIM-Bangalore in a report on measures for reviving the firms, according to a senior official from the department. The others include delisting and then merging it with BSNL, and MTNL becoming a subsidiary of BSNL.

"The first option of a holding company, with two public sector undertankings (PSUs) as subsidiaries, looks most feasible, as of now. In this, MTNL won't have to be delisted. And, we can easily synergise their operations," the official added. had asked IIM Bangalore to undertake a feasibility report on the merger of and MTNL. "A final decision is expected to be taken in next few months, which will go for a Cabinet approval subsequently," the official said.
  • Feasibility report on merger for BSNL & MTNL submitted by IIM-Bangalore
  • A final decision is expected to be taken in few months, which will go for a Cabinet approval subsequently
  • Options are to delist MTNL and merge it with BSNL or MTNL becoming a BSNL subsidiary
  • Govt has for long been trying for a merger between the two, but faced opposition from unions
  • Amidst a highly competitive telecom sector, both have been incurring losses
  • BSNL recorded Rs 7,600 cr of loss for FY15. MTNL posted Rs 745 cr net loss for the June quarter of FY16

MTNL offers services in Delhi and Mumbai, while BSNL offers its services in rest of the country. The previous government was trying for a merger between the two for quite some time, but faced stiff opposition from the unions.

Off late, both the firms had started synergising their operations in enterprise business.

"Also, there is a plan of MTNL to share spectrum with BSNL to avoid black spots in Delhi-NCR (national capital region). Since NCR comes under the jurisdiction of BSNL, there are issues in offering seamless connectivity to MTNL users outside Delhi," a senior official from MTNL said. However, the MTNL official said, there has been no official information of any plan of merger with BSNL yet.

Both the have been struggling to survive in the competitive telecom industry in India and incurring losses for some time. BSNL recorded about Rs 7,600 crore loss for FY15, while MTNL poste Rs 745 crore net loss for the June quarter this year.

BSNL has been taking various measures to come back to profitablity and is focusing big time on data services to improve revenues. BSNL will be investing close to Rs 39,000 crore in the next five years, a major chunk of it on data.

The minister for communications and information technology Ravi Shankar Prasad has been closely monitoring performance of both the firms since the past one year. Even Prime Minister's office has been taking regular meetings with the ministry and company officials to take a stock of the situation and take steps to restore the health of two telecom firms, which once dominated the mobile industry.

In August this year, the Cabinet also approved financial incentives for the two. In lieu of returning spectrum, they will be refunded Rs 169 crore (BSNL) and Rs 458 crore (MTNL). Also, the Cabinet gave nod to BSNL to hive off its towers into a separate company, aiming to generate additional revenues.

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