In a bid to pave way for a merger between Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL), the government has started the process to delist the latter from the stock exchanges. As part of the first step, MTNL will be delisted from the foreign exchange, according to people aware of the matter. MTNL first listed its American depository shares (ADSs) on the New York Stock Exchange (NYSE) in 2001 that later were taken down, and listed on OTCQX International Market in 2013.
While the process to merge both the companies is expected to take about two years, the proposal is to merge operational business of MTNL with BSNL which includes MTNL’s telecom business — wireline, wireless, and the enterprise business, along with operational assets, according to the proposed plan. Further, shares of MTNL will be delisted from India’s stock exchanges as well, with the government acquiring 90% of the shares of MTNL.
With regard to the plan of merger, MTNL will be divided in three parts – MTNL operations along with staff and operational assets, second would be other assets and liabilities including the spectrum held by MTNL, and the third will be operations of Mahanagar Telephone Mauritius (MTML) which is operationally profitable as on today.
“BSNL will take over staff and operational assets, and operations of MTNL Mauritius, whereas MTNL will continue to hold other assets and liabilities including the spectrum,” a government official said, adding that BSNL will not take over the spectrum available with MTNL.
“No liabilities of MTNL will be transferred to BSNL,” the official said, adding that the discussions with regard to other issues are going on and the process will take a few years to complete.
The government’s intent to merge the two entities was floated 20 years ago with the objective to revive the two companies and rationalise their costs. The companies started facing financial pressure due to competition from the private players in the sector.
Lately, the government appointed audit and consulting firm Deloitte as the transaction advisor, which is expected to submit its detailed analysis on the merger in the next six to seven months, sources said.
“For taking over operations of MTNL along with staff and assets, BSNL will pay certain amount to MTNL. Other assets and liabilities will be with MTNL and accordingly will be attempted for sale to clear the debts,” another official said, adding that BSNL will also acquire land of MTNL worth Rs 12,000 crore, some exchange buildings, among others.
Currently, there are total 3,508 employees in MTNL across Delhi and Mumbai, and as part of the merger, all employees will be absorbed into BSNL, sources said.
In July last year, the government approved the revival package of Rs 1.64 trillion for BSNL and MTNL. In the Cabinet note, the government had said that it would form a committee of secretaries from different ministries to decide on the merger of the two companies.
Prior to the announcement of the Rs 1.64 trillion revival package, the Parliamentary Standing Committee on Communications and Information Technology in March last year also asked the Department of Telecommunications (DoT) to carve out MTNL’s assets and debts through a special purpose vehicle and merge the company’s operations with BSNL.
At that time, BSNL and MTNL CMD PK Purwar told the panel that, “With Rs 26,000 crore debt, even if God comes to earth and tries to address its problems, the company cannot be revived. It is a fact of life; we have to accept it”.
Even the government had put the BSNL, MTNL merger proposal on hold last year due to financial reasons. “Government has approved the revival plan of Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam
In August last year, BSNL had also formed an internal committee to look into the aspects of the merger.