State-run MTNL will be a subsidiary of BSNL by transferring the government's shareholding to it following the Union Cabinet's in-principle approval to their merger.

Government holds 56.25 per cent in MTNL. Its share price was up after a long time. Its share was up 4.55 per cent at Rs 8.05.

MTNL on Friday (1 November) said that it has received a letter from the government detailing the revival plan of the company as an indication of formal communication to begin the resurrection exercise.

In October, the Cabinet had approved merger of loss-making and incipient telecom firms BSNL and MTNL as part of a revival package which includes raising sovereign bonds, monetising assets and voluntary retirement scheme (VRS) for employees.

The letter informs that there is in-principle approval for merger of BSNL and MTNL as per relevant rules/guidelines of GoI.

Meanwhile, MTNL is to be made subsidiary of BSNL by transferring the Government shareholding of MTNL to BSNL to derive the synergy in network operations and sales till the merger is completed.

The Union Cabinet in its meeting held in October considered and approved the proposals of DoT for "Revival of BSNL and MTNL".

The Cabinet, had approved a VRS package for the ailing PSUs by Reduction in the employee cost by immediately offering VRS on Gujarat Model to the employees of age 50 years and above.

The ex-gratia amount is limited so that total of ex-gratia amount (as per Gujarat Model) and admissible pension for the remaining period of service does not exceed 125 per cent of the salary that the employee would have drawn on the date of voluntary retirement in the remaining period of the service.

The payment for ex-gratia on VRS (Rs 17,169 crore) and preponed pensionary liability (Rs 12,768 crore spread over a period of 10 years) is to be supported through budgetary allocation of Government. The ex-gratia on VRS is to paid in two instalments of 50 per cent each during FY 2019-20 and during Q1 of FY 2020-21.

The communication said there will be Administrative allotment of spectrum to BSNL/MTNL for providing 4G services through capital infusion by the Government. The payment of GST on the spectrum cost will be paid through budgetary support.

Sovereign Guarantee Bonds of Rs 15,000 crore of tenure of 10 years or more to be raised and serviced by BSNL/MTNL for the purpose of debt restructuring.

BSNL and MTNL both have cumulative debt of Rs 40,000 crore.

There will be Monetisation of land/building assets following DIPAM guidelines for asset monetisation. The proceeds of asset monetisation will be credited to BSNL/MTNL to service the debt, CAPEX and other requirements.

The progress of asset monetisation will be reviewed by a committee formed under the chairmanship of Advisor to Prime Minister with Cabinet Secretary, Secretary (DEA), Secretary (T), Secretary (DIPAM) and Secretary (MoHUA) as members.

The Monetisation of tower and fibre assets using an appropriate model including leasing after considering the market conditions with the aim to maximize the returns will be taken up.

Chief Managing Director BSNL and CMD MTNL and administrative heads of all wings of Department of Telecom are requested to take note of the above Cabinet approval and take immediate steps for strict and time bound compliance of the same, the letter said.

(This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.)