Mahanagar Telephone Nigam Limited (MTNL), a state-run telecom operator in India, last week expressed its inability to pay the interest dues on bonds. The telecom operator has been struggling to grow its business and it is no surprise that it is not in a position to pay off bond dues. However, a report from the Business Standard suggests that the government will likely pay the dues on behalf of MTNL. The government will clear the payment before the due date of July 20, a DoT (Department of Telecommunications) official told the publication.
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On July 20, MTNL is supposed to pay a semi-annual interest of 7.59% on certain bonds. However, since it can't do that, the government will step in to pay the bondholders. Further, the dues will be paid before the due date. According to the structure payment mechanism of the Tripartite Agreement (TPA) signed amongst DoT, MTNL, and Beacon Trusteeship Ltd, MTNL is supposed to fund the semi-annual interest into an escrow account 10 days before the due date.
MTNL said that due to insufficient funds, it can't do so right now. MTNL's losses climbed from Rs 2,915.1 crore in FY23 to Rs 3,267.5 crore in FY24. At the same time, the revenue from operations fell to Rs 798.56 crore, down 14.6%. Things are not going well for MNTL. BSNL is already working to overtake the entire operations of MTNL in Mumbai and Delhi. BSNL already runs MTNL's mobile networks in the two cities. But now, there are reports online that suggest BSNL is going to run operations of MTNL, but there will be no merger.
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The government will consider whether or not to close MTNL in the future. Currently, the debt restructuring exercise is going on, once that is done, BSNL will overtake MTNL operations.
