The move assumes significance as both have been making losses.
The pressure of huge losses and competition has forced consolidation in the PSU telecom space as Department of Telecom is currently working on a proposal for merger of its two ailing PSUs - BSNL and MTNL - to revive the state-owned telecom firms.
The BSNL-MTNL merger is "one of the many components" of the overall revival plan being worked out for the two corporations, a source said on Tuesday, adding that a final call on the matter will be taken by the Union Cabinet.
The plan includes the MTNL being merged with the BSNL.
The MTNL provides telephony services in Delhi and Mumbai, while BSNL is present in the rest of the circles.
The move assumes significance as both have been making losses and have faced challenges in clearing staff salaries in the recent past.
The Department of Telecom is preparing a survival plan for the MTNL and the BSNL in the form of a revival package that entails components like voluntary retirement scheme, asset monetisation, and allocation of 4G spectrum.
BSNL's estimated losses are Rs. 14,000 crores in 2018-19 on the back of revenue that fell to Rs. 19.308 crores in the same fiscal. It has 1.65 lakh employees and their costs make up 75 per cent of the company's total income.
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