State-owned telecom company MTNL has defaulted on significant loan repayments, totaling Rs 8,585 crore, owed to seven public sector banks.
Understanding the Default
Mahanagar Telephone Nigam Ltd (MTNL) failed to repay loans to a consortium of seven public sector banks. These include Union Bank of India, Bank of India, Punjab National Bank, State Bank of India, UCO Bank, Punjab and Sind Bank, and Indian Overseas Bank.
The total default amount comprises Rs 790.59 crore in overdue interest and Rs 1,868.61 crore in unpaid principal. Overall, MTNL’s financial liabilities, encompassing both short-term and long-term borrowings, stand at a staggering Rs 34,484 crore.
Government Faces Mounting Telecom Burdens
This default adds to the government’s growing financial challenges, especially within the struggling telecom sector. It comes as Vodafone Idea, where the government holds a 49% stake, recently reported a massive loss of Rs 27,442 crore for FY25.
The continued losses across these public and semi-public telecom enterprises highlight the difficulties the government faces in reviving them amidst intense market competition.
MTNL’s Persistent Financial Struggles
MTNL’s financial health remains poor, with the company reporting a net loss of Rs 3,302 crore for the financial year ended March 2024. Its operating income for the same period was a mere Rs 728.47 crore.
The company acknowledged in its FY24 annual report that it has accumulated heavy losses, its net worth is significantly eroded, and its current liabilities outweigh its current assets. Following the news, MTNL shares dipped 4.22% on the BSE.
Merger Plans Evolve
The previously discussed merger of MTNL with Bharat Sanchar Nigam Ltd (BSNL) now seems unlikely. Instead, the government has approved a 10-year service agreement for BSNL to manage MTNL’s operations, particularly in Delhi and Mumbai.
This arrangement addresses the complexities of a full merger, especially MTNL’s substantial debt burden. BSNL has already taken over MTNL’s mobile services operations in Delhi since April 2021 and in Mumbai since September 2021.
Furthermore, A. Robert J. Ravi, who also serves as BSNL’s CMD, has had his additional charge as MTNL’s Chairman and Managing Director extended until October 2025.
Strategies for Asset Utilization
To improve its financial standing, MTNL is actively working to better utilize its physical assets. It has signed a Memorandum of Understanding (MoU) with BSNL to share network and infrastructure, aiming to enhance service quality.
The company is also generating additional revenue by renting out its buildings in Delhi and Mumbai. There are even potential plans to use these assets for advertising and brand-building initiatives, as outlined in its Annual Report.
Accelerating Asset Monetisation
Under a Cabinet-approved revival plan, MTNL is mandated to monetise surplus land and building assets to reduce debt and fund capital expenditure. The National Land Monetization Corporation (NLMC) has now taken over this responsibility from DIPAM.
MTNL has restarted its monetisation program with NLMC, submitting four properties each valued at over Rs 100 crore for monetisation. Simultaneously, the company is working on monetizing smaller properties, those valued below Rs 100 crore, with board and ministerial approvals.
Transaction advisors have been appointed for seven properties, each valued under Rs 10 crore, indicating a multi-pronged approach to asset sales.
- MTNL defaulted on Rs 8,585 crore in loans to seven public sector banks.
- Its total financial liabilities exceed Rs 34,000 crore.
- A full merger with BSNL is unlikely; BSNL will manage MTNL operations under a service agreement.
- MTNL is monetizing surplus assets and renting properties to generate revenue.
These efforts are part of a broader government strategy to stabilize and potentially revive the struggling state-owned telecom entity.
