State-owned telecom firm MTNL expects to be operationally profitable within two years, following a revival plan approved by the Cabinet on Wednesday.
On Wednesday, the government announced an almost $8 billion plan on Wednesday to help loss-making state telecom providers Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) catch up with private competitors, including a merger of the two companies, a Reuters report said.
The package includes raising of Rs 15,000 crore sovereign bonds to meet the immediate capital requirement of both the companies, 4G spectrum allocation worth Rs 20,140 crore, Rs 29,937 crore for VRS covering 50 percent of their employees, and Rs 3,674 crore for goods and services tax that will be levied on the allocation of radio waves.
Voluntary retirement scheme approved
MTNL Chairman and MD Sunil Kumar said the voluntary retirement scheme approved by the government is very lucrative for the employees, and he expects all the 15,000 employees eligible for it will take it.
"It is a very path-breaking decision by the government. The VRS is very lucrative for all the eligible employees. This will bring down our employees' cost to 25 percent of revenue from 85 percent at present by February. We expect to be EBIDTA positive within 2 years due to this step," Kumar told PTI.
In the VRS package, the government has approved Rs 17,169 crore as ex-gratia component and Rs 12,768 crore for the preponement of pensionary benefit.
Out of the total Rs 69,000 crore, MTNL is estimated to get Rs 4,000 crore for VRS and around Rs 7,000 crore from the sovereign guarantee bonds.
The government has set a deadline of 31 January 2020 for BSNL and MTNL employees to opt for VRS.
"Employees above the age of 53.5 years will get 125 percent of their salary which they could have earned in balance period of their service," Prakash said.
Employees in the age bracket of 50 to 53.5 years opting for the VRS will get benefit in the range of 80 to 100 percent of the remuneration to be paid in the balance period of their service.
"The VRS is voluntary; nobody can be forced to opt for it," Telecom Minister Ravi Shankar Prasad said here while sharing details of the revival package.
"The VRS package approved by the Cabinet will give eligible employees 125 percent of income that they would have earned by serving the company till the age of 60 years. With this decision, we have taken care of the interest of lakhs of employees of these PSUs," Prasad said.
MTNL to operate as a subsidiary of BSNL
Till the completion of the merger process of the state-owned companies, MTNL will operate as a subsidiary of BSNL, Telecom Minister Ravi Shankar Prasad said on Wednesday while sharing details of the revival package.
MTNL had posted a loss of Rs 3,388.07 crore and revenue of Rs 2,085.41 crore in 2018-19. The total debt on the company is around Rs 20,000 crore.
The finance cost of MTNL was around 50 percent of the revenue.
BSNL, MTNL struggle to win customers
BSNL and MTNL have struggled to win customers as Reliance Industries’ telecoms arm Jio and rivals Bharti Airtel and Vodafone Idea have rolled out 4G services and cut prices on voice calls and data, a Reuters report said.
BSNL has around 1.68 lakh employees and MTNL around 22,000.
The total debt on both the companies stood at Rs 40,000 crore, of which half of the liability is on MTNL alone which operates in Delhi and Mumbai.
The government will monetise MTNL and BSNL assets worth Rs 37,500 crore over a period of three years.
"The assets primarily include land assets but also rental and leasing of their buildings. MTNL has around 29 retail outlets in Delhi alone," Telecom Secretary Anshu Prakash said.
"The debt on BSNL is the lowest. They can raise capital expenditure required for rolling out the network from the banks and bringing in efficiency in their operations," Prakash said.
MTNL and BSNL have been demanding spectrum to start 4G services to remain competitive in the market.
Prakash said the spectrum will be allocated to both the companies administratively within a month.
"The spectrum allocation to BSNL worth Rs 14,115 crore will be in lieu of equity shares and about Rs 6,295 crore for MTNL in lieu of preferential shares," Prakash said.
--With inputs from agencies
Updated Date: Oct 25, 2019 15:04:32 IST