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BSNL, MTNL merger likely

If merged, MTNL customers can enjoy nationwide roaming on home network while BSNL would have nationwide 3G and BWA coverage.

BSNL and MTNL could be merged together along with PSU telecom equipment manufacturer ITI, if the recommendations of Board for Reconstruction of Public Sector Enterprises (BRPSE) are accepted.

This could mean that BSNL will have nationwide 3G and BWA (Broadband wireless access) coverage, offering its consumers better national roaming facility.

Merger with ITI would help these two operators roll out networks faster, thereby providing better coverage. Procurement delays, by both these PSUs (public sector units), have resulted in poor network coverage leading to dropped calls and network congestion.

MTNL users would be biggest beneficiaries of the merger as currently they get the home network only in Delhi and Mumbai. While if MTNL becomes a BSNL subsidiary, customers of the former can get nationwide roaming in home network.

BSNL will also benefit from offering service in two of the largest telecom circles in terms of subscriber numbers.

However, the biggest benefit comes from the fact that finances of both these PSU will improve due to better resource utilisation and coordination.

These three PSUs have been making losses in the last couple of years despite having benefited from government support.
BRPSE in a note said, “The board strongly recommends the merger of ITI Ltd with BSNL, or its takeover by BSNL as a separate subsidiary, thereby ensuring strategic vertical integration. This should enable BSNL to combine service-providing with manufacture of products.”

Notably, MTNL posted a net loss of Rs 2,611 crore on revenue of Rs 3,781 crore during the financial year ended March 31, 2010. ITI posted a net loss of Rs 459 crore on revenue of Rs 4,596 crore during the same period.

BSNL informed the panel that it expects to turn profitable in the year through March, 2013, but projects a net loss for the just-ended fiscal year and the on going year that began on April 1.

The company expects to post a net loss of Rs 2,725 crore on revenue of Rs 31,738 crore in the fiscal year that ended March 31, 2011, and the loss is expected to narrow to Rs 623 crore on revenue of Rs 36,569 crore in the current fiscal year (FY2011-12).

BSNL, once the country’s flagship telecom company, posted a net loss of Rs 1,823 crore on revenue of Rs 32,046 crore in 2009-2010.

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