Government Plans to Shut Down MTNL and Transfer Operations to BSN

The Indian government is currently making plans to close down Mahanagar Telephone Nigam Ltd (MTNL), a telecom operator. According to a report from Mint, sources familiar with the matter have revealed that the government intends to transfer MTNL's workforce and operations to Bharat Sanchar Nigam Ltd (BSNL), marking a significant departure from the previous plan of merging the two entities.

This decision comes as a response to MTNL's mounting debt and consistent losses. The report states that MTNL's closure is imminent, with BSNL set to take over its operations.

In the fiscal year 2022-23, MTNL incurred a loss of Rs 2,910 crore, an increase from the previous year's loss of Rs 2,602 crore. The company's revenue from operations declined from Rs 1,069 crore in FY22 to Rs 861 crore in FY23, while expenses rose from Rs 4,299 crore to Rs 4,384 crore during the same period. Additionally, MTNL's outstanding debt increased to Rs 23,500 crore in FY23 from Rs 19,661 crore in FY22.

On the other hand, BSNL saw an increase in revenues to nearly Rs 20,700 crore in FY22-23, surpassing the previous year's figure of Rs 19,052 crore. However, the company's losses also grew to Rs 8,161 crore compared to Rs 6,981 crore previously. The rise in revenue can be attributed to the growth of the fibre-to-the-home (FTTH) business, increased business from leased line services, and additional operating income. Notably, the FTTH business experienced remarkable growth of 30% year-on-year, surpassing the carrier's wireless business, which contributed less than a third of the overall revenues and grew by only 7% to Rs 5,638 crore for FY23.

In 2019 and 2022, BSNL and MTNL received two relief packages from the government. The 2019 package was worth ₹69,000 crore and included measures such as a voluntary retirement scheme for employees, allocation of administrative spectrum for 4G services, debt restructuring through sovereign bonds, and monetization of assets for maximum returns. The package also granted in-principle approval for the merger of BSNL and MTNL.

As part of the revival package, the government aimed to alleviate BSNL's financial burden by undertaking debt restructuring measures. The government would provide sovereign guarantees to BSNL and MTNL, enabling them to secure long-term loans. Through the issuance of long-term bonds, the two public sector undertakings (PSUs) would be able to raise an amount of Rs 40,399 crore, facilitating the restructuring of their existing debt and relieving the financial strain on their balance sheets.