"With these initiatives of increasing revenues and reducing cost, it is expected that BSNL will turnaround in the next two years," the note added.
The proposal to merger these government entities comes at a time when all three companies are facing fierce competition from private telecom operators and are causing huge losses to the exchequer.
MTNL posted a net loss of Rs. 2,611 crore (Rs. 26.11 billion) on revenue of Rs. 3,781 crore (Rs. 37.81 billion) during the financial year ended March 31, 2010.
ITI posted a net loss of Rs. 459 crore (Rs. 4.59 billion) on revenue of Rs. 4,596 crore (Rs. 45.96 billion) during the same period.
BSNL informed the panel that it expects to turn profitable in the year through March, 2013, but projects a net loss for the just-ended fiscal year and the ongoing year that began on April 1.
The company expects to post a net loss of Rs. 2,725 crore (Rs. 27.25 billion) on revenue of Rs. 31,738 crore (Rs. 317.38 billion) in the fiscal year that ended March 31, 2011, and the loss is expected to narrow to Rs. 623 crore (Rs. 6.23 billion) on revenue of Rs. 36,569 crore (Rs. 365.69 billion) in the current fiscal year (FY2011-12).
BSNL, once the country's flagship telecom company, posted a net loss of Rs. 1,823 crore (Rs. 18.23 billion) on revenue of Rs. 32,046 crore (Rs. 320.46 billion) in 2009-2010.
The panel advised the DoT and BSNL to submit a cogent revival/restructuring plan for BSNL, within a period of four months for consideration of the BRPSE.
The proposal needs to be approved by the Department of Telecommunications.
Why the BSNL-MTNL merger has been stuck
BSNL, MTNL hurt by number portability