Why Is Government Against Merger Between Vi And BSNL-MTNL?

The government is reportedly against the merger of Vi with both state-run telecom operators BSNL and MTNL. Kumar Mangalam Birla wants to give his 27 percent stake to the government in the merged entity so that Vi continues to operate in India.

"How can we even allow this? It's almost like having privatization of profits and nationalization of losses," a senior officer was quoted by TOI. The report said that the proposal has been rejected as BSNL and MTNL are operating due to bailout packages.

Vodafone-Idea Merger With BSNL And MTNL

It is worth noting that the Deutsche Bank research also pointed out that the government should avoid duopoly in the telecom sector.

"The vast majority of Vi's debt is a spectrum, AGR obligations, and the company will need to take on 5G spectrum at some point too. Private investors are extremely unlikely to save the company, given successive governments seeing telecom capital as something to target," Deutsche Bank research analyst Peter Milliken said.

Milliken said that the government should merge Vi with BSNL and provide targets and incentives. Vodafone-Idea is operating in 22 circles. The BSNL operates in 20 circles, and MTNL is operating in Delhi and Mumbai. However, Vodafone-Idea is higher than both telecom operators.

It has 27 crores users and owes an AGR debt and spectrum payment, which is close to Rs. 1.8 trillion (Rs. 60,960 crores, Rs. 96,270 crores, and bank debt around Rs. 23,080 crores).

On the other hand, both state-run telecom operators received a bailout package from the Department of Telecommunication. However, BSNL liabilities are close to Rs. 81,156 crores and MTNL have Rs. 29,391 crores.

Opportunities In BSNL And Vodafone-Idea Merger

It is important to note that there are a lot of challenges and opportunities in the merger as Vodafone-Idea offers 4G services in all circles, while Bharat Sanchar Nigam Limited is still waiting for approval to convert 3G sites into 4G. This might allow BSNL to offer proper services soon. In addition, a merger might allow India's third-largest telecom operator Vodafone-Idea to increase its presence in rural areas as BSNL is doing well in those circles.