The Indian government is contemplating the closure of Mahanagar Telephone Nigam Ltd (MTNL) and the subsequent transfer of its operations and staff to Bharat Sanchar Nigam Ltd (BSNL). This decision marks the abandoning of an earlier plan to merge the two state-run telecom companies, according to a Livemint report. The move comes as MTNL grapples with financial challenges, including increasing debts and persistent losses.
The report quoted two government officials familiar with the matter, citing the option of shutting down MTNL as being seriously considered due to its ongoing losses and the burden of nearly Rs 40,000 crore in debt. The report quoted one of the officials, speaking on the condition of anonymity, stating, "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."
The primary concern driving this decision is the substantial debt burden on MTNL's books. The government officials express doubts about the feasibility of reviving MTNL and believe that merging it with BSNL could plunge the latter into further financial trouble, hampering the revival prospects of both companies.
The government is also evaluating de-listing MTNL from the stock exchanges but has no plans to list BSNL, India's fourth-largest teleco, said the second official as per the report.
Also Read: Govt Commences Delisting of MTNL for Merger With BSNL: Report
BSNL, on the other hand, has witnessed some improvements in its financial position over the past few years. With a government aid of Rs 1.64 trillion in 2021 and a recent Rs 15,000 crore purchase order for 4G equipment, BSNL is on track for recovery. The telecom company has prepaid Rs 7,000 crore of bank loans and is slated to launch 5G services by 2024, according to one official.
In terms of financial performance, BSNL's revenues climbed to nearly Rs 20,700 crore in the fiscal year 2022-23, although losses widened to Rs 8,161 crore. The revenue growth was primarily driven by increased fiber-to-the-home connections, higher leased line services, and other operating income. FTTH business grew 30 percent and contributed a third of overall revenues.
In contrast, MTNL struggled to turn its fortunes around, despite government help. In the same fiscal year, the telco reported losses of Rs 2,910 crore, a rise from Rs 2,602 crore in the previous year. MTNL's revenue from operations shrank to Rs 861 crore, while expenses increased to Rs 4,384 crore.
The decision to outsource the management of wireless networks to BSNL, effective from April 2021 in Delhi and September 2021 in Mumbai, was an attempt by MTNL to improve service quality. The quarterly report from MTNL states that the management of both state-run telcos is already common.
Also Read: BSNL Commences Installation of 20,000 4G Towers in Remote Border States: Report
MTNL's auditor has raised concerns over the telco's financial health, highlighting the erosion of its net worth and the substantial difference between current liabilities and current assets. As a result, the Department of Public Enterprises has classified MTNL as an "Incipient Sick CPSE."
In response, the MTNL management emphasizes its efforts to reduce staff expenses, which constitute a significant drain on financials. The company claims to have reduced these expenses by over 75 percent, aiming to mitigate costs and losses. MTNL also highlights the government's approval of a committee of secretaries to explore the modalities of a merger with BSNL.
The relief packages provided by the government to BSNL and MTNL in 2019 and 2022 have aimed to address the financial challenges faced by the telecom companies.
