BSNL-MTNL merger to create a financially stronger entity; employees to benefit: Frost & Sullivan

The merger of state-run PSUs BSNL and MTNL has the potential to increase the overall valuation and make the merged entity financially stronger to compete with private telcos in the country, Frost & Sullivan said in a note. It added that a successful merger will be good for everyone, including employees of both the PSUs.

“I see BSNL and MTNL merger as an inevitable outcome of this rapid transformation in the Indian telecom industry…the merger will increase the overall valuation and make the merged entity financially stronger, thereby receive a better credit term, which is an essential component of capital intensive businesses,” Benoy CS, Director, Digital Transformation Practice, Frost & Sullivan said.

BSNL offers services across the country except for Delhi and MTNL where MTNL provides wired and wireless services.

Benoy added that the merger will help both companies to become leaner and thereby significantly bring down their capex and opex. “There is a lot of room for optimizing costs across their service lines…one common product, marketing, and customer service team will reduce duplication of efforts and rationalize the cost.”

However, this merger will also have various challenges. And, one of the most challenging parts will be concerning the employees. “Being a public sector entity, this challenge is manifold. It needs to be seen how the Government and DoT can navigate through the hurdles and succeed in merging the two entities. A successful merger will be good for all, including its employees.

The agency said that the merger will provide a big boost for Enterprise and Wholesale Business. The merged entity will be able to stitch together a compelling value proposition to large and medium enterprises that operate across the country. “Similarly, it will be more convenient for global operators to deal with one merged entity. In this case, too, the scale matters a lot,” Benoy said.

Both BSNL and MTNL were unable to pay salaries to their employees for the month of February. Both the PSUs recently approached the government for financial support and to resolve legacy issues, but the Centre is yet to take any final call.