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Are the two giants of Indian telecom, BSNL and MTNL really going to be

merged? No one knows. Telecom minister and his team have been giving ambiguous

answers to this question, and both BSNL and MTNL officials deny that anything

like that is happening. Without getting into the demerits of the uncertainty

arising out of this confusion, let’s try figuring out what would be the gains,

losses, and fallouts of this consolidation.


Let’s visualize how the new entity would look like, as and when it is

created. If the merger is complete within a year from now, then the combined duo

will be roughly a Rs 34,000-crore organization, with a bottomline of about Rs

4,000 crore and about 4.2 lakh employees. The converged company will have about

43 million fixed lines, 4 lakh cellular subscribers, 6 lakh WLL subscribers, and

over 5 lakh VPTs to reach out to almost each and every village in the country.

No doubt, at a time when such an infrastructure will give the organization a

huge lead over upcoming competition in terms of costs, reach and rollout of

newer services, it will be the most envious position to be in. All these three

factors together form a killer combination.

If handled properly, this merger would create a telecom entity, beating which

would be next to impossible. It should be able to capitalize in terms of

economies of scale. The merged entity would have plans to buy equipment and

services worth Rs 10,000 crore over the next few years. When every penny counts

for the bottomline, there should be saving even in terms of media buying, where

the two companies today plan to spend over Rs 50 crore. As a single company, the

BSNL should be able to draw upon the resources of MTNL expertise is newer

technologies, enterprise user focus, and customer care. MTNL is stronger here

because of the competition it has faced from the private operators. MTNL, on the

other hand could learn from BSNL’s skills in faster network rollout and better

understanding of low-end subscribers.


With enterprises from the non-metros getting options other than BSNL, and

with MTNL being forced to go for low-end low-value subscribers in the metros in

the race for increasing subscriber base, MTNL and BSNL can supplement and

compliment each other to make life difficult for competitors. After merger,

employee productivity should significantly go up.

But all this is going to be a tall order, if one knows MTNL and BSNL well.

The biggest worry is that, since both MTNL and BSNL are slow on their feet, and

not too good at co-ordination, the process of stabilization of the new entity

could take much longer than planned and expected. Private service providers

could take advantage of this.

The anti-disinvestment lobby would allege that the merger was just a prelude

to handing over the entire Indian telecom to private sector. The trade unions

could actually create problems in the name of job cuts. Such a merger would also

dampen the mood of the private players, which would only result in negative

market sentiments and slowdown.

At a time when everything is going great for Indian telecom–solid growth,

plenty of FDI inflow, increasing quality of service, higher confidence of the

world on Indian telecom infrastructure–the only thing one would want that the

merger is handled well.