Centre likely to shut down debt-laden MTNL

The government may shut debt-laden Mahanagar Telephone Nigam Ltd (MTNL) and shift its staff and operations to Bharat Sanchar Nigam Ltd (BSNL), two officials aware of the matter said, abandoning an earlier plan to merge the two state-run telcos.

The option of closure is under serious consideration since MTNL was continuing to make losses amid mounting debt, the officials cited above said on condition of anonymity. “It’s almost decided. MTNL would be shut down; the operations will be taken over by BSNL. BSNL is already executing operations in Delhi and Mumbai,” one of the two officials said.

“There’s too much debt on MTNL books: Almost ₹40,000 crore—it’s very tough to revive. If it is merged with BSNL, BSNL will go back into the red and the revival of both will be difficult,” the official added.

The government is also evaluating de-listing MTNL from the stock exchanges, but has no plans to list BSNL, India’s fourth-largest teleco, the second official said.

BSNL’s financial position has improved over the past couple of years, with a ₹1.64 trillion government aid in 2021, and a recent ₹15,000 crore 4G equipment purchase order putting it on the recovery track. “They’ve prepaid ₹7,000 crore of bank loans, and they will begin offering 5G services by 2024,” the official added.

in FY23, BSNL’s revenues rose to nearly ₹20,700 crore from ₹19,052 crore in the previous fiscal year, even as losses widened to ₹8,161 crore against ₹6,981 crore earlier. The revenue growth came on the back of higher number of fibre-to-the-home (FTTH) connections, more business from leased line services, and other operating income. FTTH business grew 30% on-year, far more than the carrier’s wireless business that contributed to under a third of overall revenues, but grew only 7% to ₹5,638 crore for FY23.

On the other hand, MTNL has floundered, despite government help. In FY23, the telco posted ₹2,910 crore losses, higher than losses of ₹2,602 crore in the previous fiscal year. Revenue from operations shrank to ₹861 crore in FY23 from ₹1,069 crore in FY22. Expenses soared to ₹4,384 crore from ₹4,299 crore in the same period, largely on the back of increased finance costs, which rose to ₹2,354 crore from ₹2,139 crore in the same period. The telco’s outstanding debt rose to ₹23,500 crore in FY23 from ₹19,661 crore in FY22. In FY23, MTNL issued bonds worth ₹10,910 crore and in FY24, the carrier will raise ₹6,661 crore through sovereign bonds, as part of the relief package approved for revival of the carrier.

MTNL said in its Q4FY23 report that maintenance and running of wireless networks has been outsourced to BSNL from April 2021 in Delhi and from September 2021 in Mumbai to improve service quality. It added that the management of both state-run telcos was also common.

According to MTNL’s auditor, the net worth of MTNL has fully eroded, and current liabilities exceeded current assets substantially. It also noted that the Department of Public Enterprises had classified MTNL as a “Incipient Sick CPSE”.

The MTNL management, however, says the company was able to reduce staff expenses—its biggest drain on financials—by more than 75%, which will help it reduce costs and losses. “Besides, the government/cabinet has further approved a committee of secretaries to look into the issues of MTNL including modalities of merger with BSNL,” the carrier said in the quarterly report. Queries to BSNL, MTNL, and the ministry of communications remained unanswered till press time.

The government has issued two relief packages to BSNL and MTNL, first in 2019 and then in 2022.

In 2019, the government approved ₹69,000 crore package that included a voluntary retirement scheme for employees of BSNL and MTNL, administrative allotment of spectrum for providing 4G services through capital infusion, sovereign bonds for a tenure of 10 years or more for the purpose of debt restructuring, and the monetization of land and buildings, tower and fibre assets with the aim to maximize return. An in-principle approval of BSNL-MTNL merger was also part of the package.

“As regards the matter of merger of MTNL into BSNL, the same is under deliberations with the Department of Telecom. The spectrum for 4G services will be assigned in 2023-24,” BSNL said in its Q4FY23 results issued in May.

“Due to financial reasons including high debt of MTNL, the merger of MTNL with BSNL is deferred,” Devusinh Chauhan , the minister of state for communications, said in Parliament in 2022.

In 2022, ₹1.64 trillion was approved for upgrading BSNL’s services to 4G, allocating premium 900 Mhz/ 1,800 Mhz spectrum, de-stressing its balance sheet providing financial support of ₹22,471 crore, and augmenting its fibre network by merging Bharat Broadband Nigam Ltd (BBL) with BSNL. The revival plan also included viability gap funding of ₹1,37,890 crore for the period 2014-15 to 2019-20, and ₹72,000 crore for six years, FY21 onwards. BSNL will also raise sovereign guarantee backed long-term bonds for ₹22,828 crore for debt restructuring.

According to BSNL’s quarterly report, ₹30,130 crore was received during FY23 in the form of equity infusion for capital expenditure and viability gap funding of ₹16,189 crore was received for the period up to FY22. Livemint