The government's decision to merge BSNL and MTNL clearly shows that it is aware that telecom is going to play a huge role in India's development since it is a great facilitator on which a host of economic activities and national security depend. It also shows that the government also recognizes that with rapid progress in emerging technologies in the sector, it cannot be left entirely in the hands of private players, especially since they would not be guided by the social good and might not serve areas where they do not see any profit.
On purely economic considerations, the merger is like throwing good money after bad. Both the PSUs have huge accumulated losses and are losing lots of money every month. They are heavily overstaffed, mismanaged and their marketing is based on stone-age principles. But in governance, economic considerations cannot be the sole criteria for taking decisions. The government has announced a liberal voluntary retirement package for employees above 50 years of age. That would eliminate a lot of deadwood from the two entities. But would that be enough?
The telecom sector is hugely competitive and needs massive and regular funds. Although the merged entity would be blessed with an infrastructure that no private player can match, it also needs to be stated that even private players with deep pockets are losing money. Even as this is being written, it has been reported that after the Supreme Court ruling on adjusted gross revenue, just Airtel and Vodafone-Idea would have to pay the government a total of Rs 50k cr out of the total of Rs 92k cr payable by the telecom companies.
If the government is serious about reviving the merged entity, voluntarily retiring senior employees will not be enough. It will have to change the way the entity will work. It will have to bring in fresh talent, if possible from the private sector and completely junk the current marketing policies. It will have to think of a name for the entity that appeals to the younger generation. It will have to invest in research and adopt cutting-edge technology before the private players. It will have to show the customers that it is not a sloth-filled and careless PSU but a competitive, new-age entity that can match and even overtake private players in providing the best services.