India's government has unveiled a slew of measures to revive the fortunes of beleaguered BSNL and MTNL, two state-backed Indian operators that have struggled in the country's fiercely competitive telecom market.

Besides proposing a merger of the companies, the revival package includes a funding injection of 150 billion Indian rupees ($2.1 billion), asset "monetization," a voluntary retirement scheme and the allocation of 4G spectrum. Authorities hope the measures will lead to a turnaround in the next two or three years.

While authorities have deliberated a merger for years, plans have always been derailed by trade union concerns and the different status of the two operators: MTNL is listed; BSNL is not. A tie-up now would pose immense challenges. Despite areas of overlap, both companies remain unprofitable, with combined debts of around INR400 billion ($5.64 billion). Earlier this year, BSNL was struggling to pay its employees. Workforce integration could be complicated. (See Not Much Hope for India's BSNL.)

The spectrum allocation, which will be made at 2016 prices and involve a INR40 billion ($560 million) government payout, seems like a positive move for the operators. But it comes very late in the 4G day. BSNL has already lost many customers because of its inability to offer a 4G service. India's private-sector players launched 4G some two or three years ago.

Plans for asset "monetization" are still rather vague. The government has identified land, buildings and other assets worth INR380 billion ($5.35 billion), indicating these will be "monetized" over the next four years. But details are thin, and it is unclear whether BSNL's fiber networks are included in the scheme.

The voluntary retirement package, meanwhile, targets employees aged at least 53.5 years and could help to thin the ranks and boost profitability. BSNL currently has about 176,000 employees, while MTNL has 22,000. The normal retirement age at both companies is 60.

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"The revival package will help but is unlikely to be enough in the wake of massively changed market dynamics," says Deepak Kumar, the founder analyst at B&M Nxt. "A complete shift in the decision-making process as well as in procurement and new network deployment is required. Such sweeping changes are not possible within the existing organizational structure. A more disruptive approach to transformation would be required to ensure long-term survival."

The government is under pressure to ensure both companies survive. While private-sector players have tended to focus on more lucrative urban areas, BSNL and MTNL have targeted rural and lower-income communities, providing connectivity services that are critical in those parts of the country. And with nearly 200,000 jobs at stake, their disappearance could be extremely awkward for authorities.

— Gagandeep Kaur, contributing editor, special to Light Reading