MTNL says not aware of BSNL merger talks; stock up 16%

Mahanagar Telephone Nigam Ltd, the state-owned telecommunications operator in the metro areas of Delhi and Mumbai, said it was not aware of any ‘restarting’ of talks related to its merger with Bharat Sanchar Nigam Ltd, the pan-India telecom operator owned by the public.

“We are not aware of any such news. As and when any such direction or proposal comes from the administrative ministry of MTNL, i.e. the Department of Telecommunications, we will inform..” it said.

The statement came in response to letters sent by Indian stock exchanges after the company’s stock zoomed 16% in trade today to close at Rs 26.10. The stock used to trade as high as Rs 41 in Sept 2012, but has declined due to poor financial results since then.

Today’s stock movement was in reaction to several reports in newspapers claiming that the Prime Minister’s office directed MTNL to suggest ‘viable options’ on its merger with BSNL.

“The PMO has asked department of Telecom (DoT) to go for the MTNL-BSNL merger. The then Telecom Secretary JS Deepak discussed this issue with the MTNL chief and asked to explore the modalities for the merger of these two entities,” the Pioneer said, quoting unnamed sources.

MTNL did not directly rebut the media reports as it denied that it had got any direction from the DoT, while the reports referred to a directive from the Prime Minister’s Office.

This is not the first time that there is talk of the two companies merging, though such talk have an added impetus this time due to the rapidly deteriorating financial condition of the companies, particularly MTNL.

The merger has been in the works for over five years. The current National Democratic Alliance administration had also promised to look at the merger when it came to power in 2014.

The metro-focused operator has failed to attract new subscribers and hold on to existing ones due to poor perception about its customer service. Unlike those of private companies, MTNL’s service centers are run on the lines of government offices. Moreover, the company’s coverage and data capacity has also lagged the others due to poor investment.

Like MTNL, BSNL has also been facing its own problems. While poor customer service perception is also a key factor, another has been the expenses related to maintaining its huge and unwieldy copper network.

With customers switching to mobile phones for voice calls, the company is not able to recover the cost of maintaining its landline operations from its rapidly shrinking subscriber base, leading to accumulated losses of around Rs 50,000 cr.

However, BSNL has proven itself to be more resilient compared with MTNL, as it is the sole provider of wired broadband in most of India, unlike in the metros where competition is fierce.

Nevertheless, BSNL’s finances are expected to take another big knock in coming days as many of India’s wireless operators have launched high-speed wireless data services in rural and semi-urban areas in recent months using 4G technology.