Indian government considering closing MTNL, transferring operations to BSNL
BSNL's Recovery Journey, Prepaid Loans, and 5G Plans Amidst MTNL's Struggles
7 June 2023
The Indian government is considering shutting down MTNL and transferring its operations and staff to BSNL due to MTNL's mounting financial challenges, including increasing debts and persistent losses.
The decision to close MTNL is driven by the company's substantial debt burden, with doubts about its feasibility of revival and concerns over potential negative impacts on BSNL's financial stability.
In contrast, BSNL has shown signs of improvement, aided by government support and plans for 5G services, with prepaid bank loans and increased revenue, although losses have widened.
The contemplation by the Indian government regarding the potential closure of Mahanagar Telephone Nigam Limited (MTNL), a state-owned telecommunications company, and the subsequent transfer of its operations and personnel to Bharat Sanchar Nigam Limited (BSNL) represents a departure from the previously envisioned merger between the two entities. This decision has arisen due to the persistent financial challenges faced by MTNL, characterized by mounting debts and continuous losses.
As per government officials cited in a Livemint report, the substantial losses sustained by MTNL and its debt burden of nearly Rs 40,000 crore have prompted serious consideration of shutting down the company. One official even indicated that the closure of MTNL is nearly finalized, with its operations set to be taken over by BSNL, an entity already responsible for operations in Delhi and Mumbai.
The central concern driving this decision is the considerable debt burden carried by MTNL. Government officials harbor doubts about the feasibility of reviving MTNL and express concerns that merging it with BSNL could further strain the latter's financial stability, thereby impeding the prospects of revival for both organizations. Consequently, the government is evaluating the possibility of delisting MTNL from the stock exchanges, while no plans exist for listing BSNL.
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In contrast, BSNL has exhibited signs of improvement in recent years. Supported by government aid amounting to Rs 1.64 trillion in 2021 and a recent Rs 15,000 crore purchase order for 4G equipment, BSNL is on a trajectory toward recovery. The company has already prepaid Rs 7,000 crore of bank loans and has outlined plans to introduce 5G services by 2024. Although BSNL's revenue for the fiscal year 2022-23 reached nearly Rs 20,700 crore, it experienced widened losses amounting to Rs 8,161 crore.
On the other hand, MTNL has encountered difficulties in reversing its fortunes, despite receiving government support. In the fiscal year 2022-23, the company witnessed increased losses of Rs 2,910 crore compared to Rs 2,602 crore in the preceding year. Revenue from operations plummeted to Rs 861 crore, while expenses surged to Rs 4,384 crore. MTNL's attempts to enhance service quality by outsourcing wireless network management to BSNL in Delhi and Mumbai did not yield the anticipated outcomes.
The financial health of MTNL has raised concerns among its auditors, who have highlighted the erosion of the company's net worth and the significant disparity between its current liabilities and current assets. To address these issues, MTNL has been dedicated to reducing staff expenses, which pose a substantial burden on its finances. The company asserts that it has successfully reduced these expenses by over 75 percent, aiming to mitigate costs and losses. Additionally, the government has sanctioned a committee of secretaries to explore the intricacies of a potential merger between MTNL and BSNL.