India decides to merge MTNL and BSNL and offer voluntary retirement to many of its employees

• A huge decision by the Narendra Modi government to merge two ailing state-owned telecom operators.
• MTNL will be merged with BSNL. It will take time and in the mean time, MTNL will act as a subsidiary of BSNL.
• BSNL will raise ₹15,000 crore via sovereign-backed bonds as part of the revival plan.
• Employees will be offered a voluntary retirement plan-- 125% of their salary for the remaining years until retirement.

A huge decision by the Narendra Modi government to merge two ailing state-owned telecom operators.

MTNL will be merged with BSNL. The process will take time and in the mean time, MTNL will act as a subsidiary of BSNL. BSNL will raise ₹15,000 crore via sovereign-backed bonds as part of the revival plan.

This is likely to cause some anxiety among the over 2 lakh staff at the two companies. Employees will be offered a voluntary retirement plan-- 125% of their salary for the remaining years until retirement.

"Neither BSNL and MTNL will be closed or sold or disinvested. We want to make it more competitive," Union Minister Ravi Shankar Prasad said at a press conference today (October 23).

"Other telcos spend 5% on human resources, BSNL and MTNL were spending 70% of their revenue on the same," Prasad said underscoring the importance of shedding manpower at the two companies.

For example, if a 53-year old employee opts of voluntary retirement, he/she will get 125% of the salary for the next seven years until retirement. This won't be forced, it will be 'voluntary' retirement, Prasad explained.

In addition, soveriegn bonds worth ₹15,000 crore will be raised and serviced by BSNL to get the resources needed to compete in a tough telecom market led by Mukesh Ambani-owned Reliance Jio, Sunil Mittal-led Airtel, and the Birla Group led Vodafone Idea. The government also plans to make BSNL sell its 4G spectrum for additional money.

BSNL is saddled with a debt of ₹13,000 crore, and accumulated losses estimated at ₹14,000 crore. "These are strategic assets of India. You know that BSNL plays an important role when there are natural disasters in Nepal, Kashmir and other parts of India," Prasad said explaining why the Indian government wouldn't like to sell the two companies.

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