Consultant wants 2G, 4G spectrum for BSNL, may delay MTNL merger

BSNL merger controversy
A woman speaks on her mobile phone in front of the logo of Bharat Sanchar Nigam Ltd (BSNL) painted on a wall outside its office in Kolkata, India. REUTERS/Rupak De Chowdhuri/File Photo

A merger between state-run telecom operators Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited may get delayed with a government-appointed consultant suggesting allocation of 2G and 4G spectrum to BSNL in Delhi and Mumbai to make it a pan-India telecom operator.

BSNL offers its wireline and wireless services in 20 telecom circles, while MTNL offers services in Delhi and Mumbai.

Neither telco has 4G spectrum in India. BSNL, however, offers 4G service in select areas using the 3G spectrum. Unavailability of the 4G spectrum has limited BSNL’s capabilities to better compete with private telecom operators.

The Indian government had appointed Deloitte Haskins & Sells LLP to prepare a plan for BSNL-MTNL’s merger and highlight challenges. In its latest report submitted to the Indian government, Deloitte came up with various suggestions including allocation of 2G and 4G spectrum to BSNL in two circles and monetization of MTNL’s real estate assets.

Deloitte has also suggested delisting of MTNL before the merger with BSNL.

In its report, Deloitte said MTNL can surrender its 3G spectrum and with the surrendered proceeds, it can reduce its outstanding debt to some extent. MTNL’s 2G spectrum license has already been expired in both Delhi and Mumbai circles. 

The Indian government had on October 23, 2019 approved the revival plan for BSNL and MTNL. Under the plan valued at Rs 70,000 crore ($9.21 billion), the government allowed the merger of the two loss-making telecom operators, besides infusion of Rs 15,000 crore ($1.97 billion) infusion via sovereign bonds, a voluntary retirement scheme (VRS) and allocation of 4G spectrum.

The government had said that the merger process may take 18-24 months.

Earlier this week, the Department of Economic Affairs, in a notification said that both BSNL and MTNL will receive a sovereign guarantee worth Rs 15,000 crore.

“Sovereign guarantee of Rs 15,000 crore (Rs 8,500 crore ($1.12 billion) to BSNL and Rs 6,500 crore ($0.86 billion) to MTNL) for the restructuring of their existing debts and meeting some Capex requirements for the launch of 4G services,” the Department of Economic Affairs said.

Under the revival plan, the government had decided that MTNL will be made a subsidiary of BSNL by transferring government shareholding of MTNL to BSNL.

Deloitte, however, said that “subsidiarisation” followed by the merger between BSNL and MTNL result in outstanding debt of over Rs 45,000 crore for the new entity, which will be unsustainable.

According to a report by Financial Express, MTNL’s outstanding debt liability for the financial year 2018-19 stood at Rs 20,000 crore ($2.63 billion), while finance cost stood at Rs 1,703.18 crore ($224.1 million). BSNL also had a similar amount of outstanding debt and financing cost.

BSNL is also in a process of releasing a new tender for a 4G network expansion in the country. The new tender will reportedly bar the participation of any Chinese vendor. Players like ZTE and UTStarcom already provide telecom equipment for BSNL’s network in India.

The previous tender was recently scrapped after the Indian Army clashed with Chinese troops in the Galway Valley in Eastern Ladakh.

The Indian government has reportedly asked state-owned gear vendor ITI Limited to bid for BSNL’s forthcoming 4G tender. ITI is currently in talks with other local and multinational vendors to build capability, having inked deals with Tech Mahindra.

Be the first to comment

What do you think?

This site uses Akismet to reduce spam. Learn how your comment data is processed.