MTNL hits upper circuit on merger announcement with BSNL

The government on Wednesday approved the proposal for reviving the telecom players MTNL and BSNL. The loss making telecom public sector players will be merged under the revival plans.

The announcement made after market hours on Wednesday stated that the government has decided to merge telecom firms Mahanagar Telephone Nigam (MTNL) and Bharat Sanchar Nigam (BSNL), as part of a revival package that includes raising sovereign bonds, monetizing assets and voluntary retirement scheme (VRS) for employees. The government will put in Rs. 29,937 crore for revival of the two state-owned telecom companies.

Under the proposed revival plan MTNL and BSNL will raise long term bonds of Rs. 1500 crore backed by the sovereign guarantee of Indian government. The main purpose will be to restructure debt and meet operational needs. Network upgradation will be a key objective for the companies in the future. The government will allot 4G spectrum to boost its competitiveness in the market.

Bharat Sanchar Nigam Limited (BSNL) sees this as a very important step from the government. According to the latest published financial numbers by the company, its net loss stood Rs. 8000 crore in fiscal 2018 while MTNL, for FY19, reported net loss of Rs. 3390 crore.

On Thursday, MTNL was locked in at upper circuit of 5 per cent with share price of Rs. 6.19 on BSE.