Indian government bails out BSNL

It turns out that state-owned operator BSNL isn’t very efficient, but the Indian government reckons merging it with even less efficient MTNL should sort things out.

That’s the cunning plan recently unveiled by Indian Telecoms Minister Ravi Shankar Prasad, according to reports and Twitter (see below).  BSNL, which has over 100 million subscribers, will be merged with MTNL, which has three million. It’s not known whether they will pick a new, unhelpfully vowel-free abbreviation for the combined effort.

On top of the merger they will apparently have 350 billion rupees chucked at them (if we have understood crore correctly), which is around 5 billion bucks. In return they will have to ‘monetize’ a similar value of assets held by the two companies. Various other chunks of cash are being mentioned in reports, so it’s hard to pin down the precise size of the bailout, but it’s substantial. On top of all that MTNL alone seems to have accumulated around 200 billion rupees in debt, which is a good effort.

“Neither BSNL/MTNL is being closed, nor are they being disinvested, nor are they being hived off to any third party,” Prasad is quoted as saying. “With all these measures, I’m confident, BSNL will become EBITDA positive in the next two years.” They’re also getting a bunch of 4G spectrum to help with the great turnaround, and will be offering thousands of employees voluntary redundancy.

The concept of a state-run telco is a pretty anachronistic one and it’s not at all surprising to hear BSNL and MTNL are struggling in the fiercely competitive Indian market. Apart from the expensive streamlining it’s not at all obvious what a state bail-out will achieve other than keeping them on life support a bit longer and we wouldn’t be surprised if this is a fairly contentious move.