A potential merger between lossmaking Indian state-owned operators BSNL and MTNL is back on the agenda, with the nation's Department of Telecom planning to put a merger proposal before cabinet by June.
A parliamentary panel has reported that the department is working on a plan to integrate the two companies in phases, but do not yet have one prepared, the Economic Timesreported.
A proposal is expected to be ready by the end of June, according to India's previous telecommunications secretary, who was transferred to the commerce department last month.
BSNL and MTNL are both grappling with issues including poor service quality, a lack of investment and ongoing losses, and a merger could help resolve these problems by creating operating synergies, the report states.
Joining forces would transform the combined entity into a pan-India operator, which would give it more scope to compete against the larger private competitors. Currently MTNL only offers mobile services in Delhi and Mumbai whereas BSNL operates in the rest of India.
But various obstacles will need to be overcome before a merger can take place, including variation in salary structures and MTNL's large debt burden. A previous attempt to improve the performance of two state-owned companies - Air India and Indian Airlines – was also not a successful move.
Various governments have been proposing between the two state-owned operators for years, but so far none of the proposals have been put into action.