BSNL+MTNL=?

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.