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The government is working on a Rs 74,000 crore bailout package for state-run telecommunication companies Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL), reports The Times of India.
The scheme involves an attractive exit package of an additional five percent compensation (ex-gratia) and provisions for 4G spectrum and capital expenditure, the report said.
BSNL is India’s largest loss-making state-run entity, with losses estimated at Rs 13,804 crore as of FY19-end. MTNL comes third with a loss of Rs 3,398 crore. Only national carrier Air India has a higher loss than MTNL.
Of the proposed bailout, about Rs 20,000 crore will be allotted for 4G spectrum and Rs 40,000 crore for a voluntary retirement scheme (VRS) and early retirement benefits. The two PSUs will, however, pay roughly Rs 13,000 crore on capital expenditure .
Moneycontrol could not independently verify the report.
The government thinks lowering the retirement age to 58 from 60 and offering a decent VRS package will lower cost at the loss-making companies, the report said. The move would enable them to aggressive pitch new tariff plans.
Recently, BSNL said it has cleared employees’ salaries for June. It added that it is awaiting clearance of dues worth Rs 14,000 crore from the Department of Telecommunications (DoT).
The government is also evaluating the option of monetising assets — towers, land bank and optical fibre — of BSNL and MTNL. A draft Cabinet note has been circulated on the subject, the report added.
DoT said the bailout is a better option than shuttering the two PSUs, which will cost Rs 1.2 lakh crore, the report stated. The department is of the view that a strategic divestment might not find too many buyers, given the financial pressure in the telecom sector.
A joint venture between MTNL and BSNL is an option, the department added.
BSNL and MTNL have been struggling to compete with private players in the sector due to high costs and poor management. Neither company has rolled out 4G services, while private companies launched their offerings a few years back. Average revenue per user (ARPU) of these two telcos stands at Rs 38 compared to Rs 70 for private players.