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Friday, Jan 08, 2010
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Info-Tech - Mergers & Acquisitions
BSNL-MTNL merger back on the menu
Thomas K. Thomas
New Delhi, Jan 7
The merger talks between Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd could be back on the menu. The two PSUs discussed the issue at a meeting with the Prime Minister on Wednesday as part of a plan to revive the company's profitability.
The two telecom companies have been exploring possibility of a merger for the past two years, but issues related to management, employee compensation and holding structure had put the deal on a backburner.
Pressure to perform
But now with both BSNL and MTNL losing their market share to private players, there is pressure on them to perform. While BSNL does not have access to most lucrative markets of Delhi and Mumbai, MTNL does not have presence in other parts of the country. Synergising their operations could put them in a better position to take on the intense competition in the mobile segment.
In a bid to get BSNL to work more efficiently, the Government is also looking to get the company listed on the stock exchanges. Though the Government had given its nod for the Initial Public Offering (IPO) over a year back, the employees union are against the proposal. The BSNL management has been asked to negotiate with the employees union and move ahead on the plan.
Issues related to BSNL's 93 million line mobile equipment tender was also discussed.
The tender, floated in 2007, has not yet been awarded due to controversy over the way the company selected the vendor. BSNL may be asked to exclude 3G equipment from the tender altogether and stick to buying only 2G gear. Meanwhile the Central Vigilance Commission is also investigating allegations of irregularities in selecting the vendors.
In addition, BSNL has also sought a waiver of its licence fee which could lead to savings of over Rs 4,000 crore. However the decision will have to be taken in consultation with the Finance Minister. But private players are likely to object to this waiver and also claim similar sops.
The profits of the two PSUs have been declining over the past two years due to intense competition from the private operators. BSNL, which at one time was the number two mobile player in the country, has now slipped to number four. The company's profits have also fallen drastically and the company could go into the red at the end of this fiscal.
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