Merger will improve financial health of BSNL and MTNL, say experts

While the merger will help the two telcos better utilise each other’s assets, it will also improve service quality, says a report prepared by consultancy firm Frost & Sullivan.

For MTNL, a merger with BSNL means it would be able to expand operations nationwide through network utilisation.

A merger will help the two companies optimise costs, capital expenditure as well as operational expenses. Besides, the company would enjoy better credit terms, which is a crucial aspect in the industry.

A merger of MTNL and BSNL is also in the best interests of the government and other stakeholders, says the report.

It also pointed to the current trend of consolidation in the sector, which is inevitable as the telecom industry is undergoing a rapid transformation. 

While the low tariff format introduced by Reliance Jio may not continue forever, the report said, streamlining of operations and keeping tariffs minimum would drive growth in the sector.

For the state-run telcos, the debt burden is less than that of their private peers while they are better off in asset terms. In a competitive market, however, a consolidation of the two telcos might help them stay afloat, say experts.

Meanwhile, reports say, salary woes at BSNL has helped have helped fast-track the efforts to bring back the public sector undertaking (PSU) to a sustainable level and that BSNL’s problems may ease by June.

Hectic discussions are underway between senior officials of the Department of Telecommunications (DoT) and BSNL since delay in payment of February salary, which was paid earlier this month.

Meanwhile, broadband satellite network provider Hughes Communication has won a Rs40 crore seven-year contract from BSNL to expand satellite broadband connectivity in Andaman and Nicobar Islands and Lakshadweep. It said the contract will seek to address the growing bandwidth demand in these island regions, which are located beyond the reach of terrestrial technology.