The government has decided not to merge the two state-run telecom companies, BSNL and MTNL, as originally proposed. Instead, operations of the smaller, listed MTNL will be handed over to the much larger BSNL, according to a report by the Times of India.
This new plan will first be reviewed by the Committee of Secretaries (CoS) and then sent to the Union Cabinet for approval.
Benefits for Both Companies
MTNL, which operates in Delhi and Mumbai, will benefit from BSNL’s support. For BSNL, this move will allow it to expand its presence across India while working on a revival plan.
Avoiding Delisting and Share Buybacks
By not merging the two companies, there is no need to delist MTNL from the stock exchanges. A merger would have required MTNL to be delisted and possibly buy back a certain number of shares. This new plan avoids that by simply transferring operations.
Fast-Tracking the Handover
The Department of Telecommunications (DoT) aims to quickly finalize this handover to boost the business of both companies. Despite a sector boom, both BSNL and MTNL have struggled to capitalize on it.
MTNL’s Financial Struggles
MTNL has been facing financial difficulties, with its shares up 139% year-on-year despite ongoing losses. The company’s shares closed at ₹46.3 on July 12. Once BSNL takes over operations, MTNL will be left with its land and buildings.
Leadership Changes
Last week, MTNL’s CMD RSP Sinha resigned following criticism over declining revenues and market share. Sinha had been given a three-month ad hoc extension in September after his five-year term ended. His resignation highlights the ongoing financial struggles of MTNL, which has been losing market share and dealing with a large redundant workforce.
Financial Performance
For FY24, MTNL reported losses of ₹3,303 crore, up from ₹2,911 crore the previous year. Annual revenue from operations declined by 15% to ₹728 crore in FY24 from ₹862 crore in FY23. Additionally, MTNL’s outstanding debt increased to ₹25,795 crore in FY24 from ₹23,500 crore in FY23.
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