India’s DoT reportedly discussing tie-up between state-owned telcos due to damaging price war.

A merger between India’s BSNL and MTNL could be back on the cards, it emerged this week, as the state-owned telcos struggle to compete with Reliance Jio Infocomm.

A source at the Department of Telecommunications (DoT) cited by the Economic Times on Tuesday said both operators are under financial stress, and that a top-level meeting was held recently to discuss the possibility of combining the two.

However, one of the big hurdles facing any deal is the relative strengths of BSNL and MTNL – the former is in considerably better health than the latter. A merger would rescue MTNL but encumber BSNL.

MTNL offers mobile services in just two, albeit highly-prized telecom circles: Delhi and Mumbai. According to the Telecom Regulatory Authority of India (TRAI), the operator had 3.6 million subscribers at the end of 2016; this, in a market with more than a billion mobile connections.

MTNL is straining under a hefty debt burden, which stood at 194.18 billion rupees (€2.75 billion) at the end of 2016, according to the ET. It made a net loss last year of INR20.06 billion.

According to communications minister Manoj Sinha, who was cited in the report, MTNL "is borrowing money to meet its day-to-day requirements."

Meanwhile, BSNL offers mobile services in every telecom circle that MTNL does not, and had 96.79 million subscribers at the end of 2016. Like MTNL, BSNL is also in the red, but an aggressive turnaround plan is narrowing its losses.

Both telcos also offer fixed-line services in the same circles they offer mobile. BSNL has 13.74 million subscribers, while MTNL has 3.48 million.

India’s government has for years sought to bring BSNL and MTNL together.

The two were said to be close to finalising a merger in July 2015, as rumours swirled that MTNL was planning to de-list its shares in preparation for a tie-up.

However, MTNL denied that such a plan was in the works, and a supposed 31 July deadline for agreeing the structure of the combination passed without a deal being struck.