BSNL and MTNL forgo merger, sign 10-year service agreement  

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The agreement will see BSNL take over the management of MTNL, with the former joining the latter as a management agency

For many years now, India’s state-owned telecoms firms Mahanagar Telephone Nigam Ltd (MTNL) and Bharat Sanchar Nigam Ltd (BSNL) have been haemorrhaging subscribers, struggling to compete effectively against the country’s two largest telcos, Reliance Jio and Bharti Airtel.

In an effort to make the companies (and, therefore, the national telecoms sector itself) more competitive, the government has been considering merging the two businesses since at least 2022. This, the government suggests, would generate valuable synergies, allow for considerable operational streamlining, and make the companies more attractive targets for investment.

However, the dire financial struggles of both companies have seen merger talks irretrievably bogged down in discussions of debt and regulatory roadblocks.

Instead, in recent months the government has leaned towards handing over control of MTNL’s operation to BSNL without formally merging the businesses. This, reports suggested, would remove some of the logistical hurdles related to a merger, such a having to de-list MTNL and buy back a certain number of shares.

This week, MTNL has announced it has approved just such a move, with the new deal seeing BSNL manage the operator for the following ten years. The deal can potentially be renewed by mutual agreement by both companies and can also be annulled by either party given six months’ notice.

This solution is not without its own headaches, however. The Department of Telecommunications (DoT) is currently exploring what such an agreement will mean when it comes to tax implications, saying they will not give the greenlight until they can be sure it will not result in unforeseen tax liabilities for the government.

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