The proposal is beneficial for BSNL rather than MTNL and consequently the return ratios for the shareholders of MTNL would get affected, the report pointed out.
The modalities of the merger are awaited. Though the merged entity would have presence across the country the return ratios would be depressed on account of higher interest charges as BSNL has debt of around Rs 17,500-20,000 crore.
Other factors which would lead to return ratios being depressed include higher employee strength, an anticipated unfavourable interconnect ratios for MTNL due to the proposed merger.
The merger would impede the disinvestment of MTNL, it said adding BSNL would stand to gain as then (post merger) it would have presence in Mumbai and Delhi circle which accout for 22 per cent of total telecom rvenues and around 13 per cent of the direct exchange lines (DELs).
Listing out the other factors detrimental for MTNL, Birla Sun Life securities said, Blended average revenue per user for the merged entity would be lower than the existing levels for MTNL.
Elasticity in Mumbai and Delhi is higher in domestic long distance and international long distance segments as compared with other circles. Hence MTNL takes a shorter time span to return to pre-tariff cut revenues as compared to BSNL, the report said. (PTI)